China vs. US Economy: Comparative Analysis and 2025 Outlook

The re-election of Donald Trump has introduced significant shifts in U.S. economic policy, notably the initiation of a new trade war through substantial tariffs on imports from Mexico, Canada, and China. This move has contributed to global economic uncertainty and instability.

Concurrently, China’s government is focusing on stabilizing growth through strategic investments and stimulus measures. However, fundamental weaknesses in real estate and consumer confidence remain unresolved.

In this article, we will compare key economic indicators of China and the U.S., examining their respective strengths and challenges in 2025 and beyond.

China vs. US economy: Key indicators

GDP

In 2024, the US economy reached approximately US$29.2 trillion, reflecting a 2.8 percent annual growth rate. This growth was primarily driven by strong consumer spending and investments in technology and services. In contrast, China’s economy expanded by 5.0 percent in 2024, bringing its gross domestic product (GDP) to approximately RMB 134.9 trillion (US$18.9 trillion). This growth was fueled by robust manufacturing and high export demand. Despite challenges such as real estate instability and trade restrictions, China outpaced the US in growth rate; however, China’s domestic consumption remains lower than that of the US and faces significant challenges.

A key distinction between the two economies lies in per capita GDP, which reflects income distribution and economic productivity per individual. In 2024, the US had a significantly higher per capita GDP of US$86,600, underscoring its high-wage labor market and strong service-driven economy. In contrast, China’s per capita GDP stood at RMB 95,749 (US$13,445), indicating a lower individual income level despite the country’s vast economic size. This gap highlights the ongoing structural transformation in China’s economy as it shifts from export-led industrialization to domestic consumption-driven growth. While China has made progress in increasing income levels, it still lags behind the US in household wealth, social services, and purchasing power parity.

Investment

In 2024, the US continued to be a leading destination for Foreign Direct Investment (FDI), with sectors such as technology, finance, and renewable energy attracting significant foreign capital. The robust US economic recovery post-COVID and demand for safe investments have bolstered the US’s dominance in global financial flows. Key initiatives in infrastructure, clean energy, and semiconductor technology under the Biden administration have attracted substantial FDI, particularly from allies like Canada, Japan, South Korea, and Britain.

China, meanwhile, has historically been a major recipient of FDI but faced a slowdown in 2024 due to concerns over regulatory unpredictability, the property sector downturn, and US-China geopolitical tensions. Despite this, China remains one of the world’s top FDI recipients, leveraging its vast labor market, growing middle class, and expanding high-tech industries.

In addition to FDI, in 2023 and 2024, both the US and China demonstrated strong outbound direct investment (ODI) growth, albeit with distinct strategies and geopolitical considerations. The US ODI position grew by US$364.0 billion (5.8 percent), reaching US$6.68 trillion in 2023, primarily driven by investments in Europe, particularly in Ireland, Switzerland, and the Netherlands. However, US regulations tightened on investments in China, with Executive Order 14105 restricting American capital in semiconductors, AI, and quantum computing to protect national security.

In contrast, China’s ODI surged by 11.3 percent in 2024, reaching RMB 1,159.27 billion (US$ 162.78 billion), with significant investments in the Belt and Road Initiative (BRI), clean energy, and high-tech sectors. While China expanded its presence in Africa, Europe, and Asia, particularly in infrastructure and technology, US investments remained concentrated in developed economies, with a focus on financial services and corporate expansion. The US continues to lead in overall ODI volume, but China’s targeted investments, particularly in emerging markets and strategic industries, highlight its growing global influence despite regulatory challenges and geopolitical tensions.

Consumption

Consumer spending was a key driver of economic performance in both countries, with US retail sales maintaining robust growth throughout 2024. The US economy benefits from a consumer-driven model, where personal consumption expenditures (PCE) accounts for nearly 70 percent of GDP. Despite rising interest rates, strong wage growth and low unemployment sustained consumer confidence. From October to December 2024, the consumer spending in the US grew by 0.4 percent, 0.5 percent, and 0.8 percent, respectively.

In China, retail sales increased by 3.5 percent in 2024, reaching RMB 48.35 trillion (approximately US$6.78 trillion). This reflects China’s ongoing transition towards a consumption-led economy. However, economic uncertainties have tempered consumer confidence, limiting the full potential of domestic spending. Despite these challenges, the Chinese government has set an ambitious GDP growth target of around five percent for 2025, underscoring its commitment to stimulating consumption and ensuring economic stability.

Employment

The US maintained a relatively low unemployment rate of around four percent in 2024, supported by job creation in healthcare, technology, and professional services. Labor market resilience was a key driving force behind economic expansion. China’s surveyed urban unemployment rate stood at around five percent, reflecting relative stability in employment. However, youth unemployment remained a growing concern, with job creation in high-tech and urban industries struggling to keep pace with the growing number of graduates.

Inflation

Inflation trends diverged between the two countries in 2024. The United States saw inflation ease to 2.3 percent, down from 3.3 percent in 2023, indicating the success of Federal Reserve policies aimed at controlling price growth. Cooling inflation helped preserve consumer purchasing power and sustain economic growth.

China, on the other hand, experienced very low inflation, with the Consumer Price Index (CPI) increasing by just 0.2 percent in 2024. The largest declines in CPI were observed in fresh fruit prices, which fell by 3.5 percent, and in transportation and communication, which decreased by 1.9 percent which was primarily driven by the increased adoption of new energy vehicles. In contrast, CPI increases were recorded in several key sectors. Healthcare costs rose by 1.3 percent, education costs increased by 1.5 percent.

China’s economic landscape: Transition amid growing headwinds

External pressures and trade challenges

China’s economic growth has slowed in the past three years, with GDP expanding by five percent in 2024, a recovery from the COVID-19 downturn but still below pre-pandemic levels. While exports remain a key driver of growth, especially in December 2024, declining global demand and increasing trade restrictions from major economies are intensifying external pressures. The return of Donald Trump to the presidency signals increasing trade tensions, with Trump raising tariffs on Chinese goods to 20 percent effective March 4 and China countering Trump’s tariffs with duties on US agricultural products. Given that China exported approximately US$524.66 billion in goods to the US in 2024 (+4.9 percent YoY), such tariffs could significantly impact China’s manufacturing sector and external trade balance.

Despite these uncertainties, China’s exports grew by 10.7 percent year-on-year in December 2024, accelerating from 6.7 percent in November and exceeding the 7.3 percent growth forecasted by economists. This strong performance, however, was largely attributed to manufacturers rushing to ship goods overseas before potential US trade restrictions take effect and ahead of the Lunar New Year holiday. China’s trade surplus widened to US$104.8 billion in December from US$97.4 billion in November, with the surplus against the US specifically rising to US$33.5 billion.

While December’s trade data suggests resilience, risks remain. China’s share of US imports (General Imports) has already fallen from 21.2 percent in 2018 to 13.85 percent in 2023 as companies diversify sourcing to countries such as Vietnam and Mexico. Additionally, China faces mounting challenges from the European Union’s protectionist stance, particularly in the electric vehicle sector. The EU has initiated anti-subsidy investigations into Chinese EV exports, with potential tariffs of up to 35 percent, which could threaten China’s US$40 billion EV export industry.

A key driver of recent export growth has been China’s ability to leverage its weakening Yuan, which has made Chinese goods more competitive abroad. Additionally, manufacturers have continually reduced prices to attract international buyers, helping sustain demand despite global economic headwinds. However, the long-term sustainability of this strategy is uncertain, as deflationary risks persist and overcapacity in manufacturing remains a concern.

Domestic economic challenges and policy responses

Domestically, China is grappling with a high level of local government debt, weak consumer sentiment, and a struggling real estate sector. As of 2023, total local hidden debt stood at RMB 14.3 trillion (US$2 trillion), with an overall government debt-to-GDP ratio of 67.5 percent when including both statutory and off-balance-sheet debt. To address mounting repayment pressures, the central government has authorized local governments to borrow an additional RMB 6 trillion (US$820 billion) over three years (2024–2026) to restructure hidden debt under more favorable terms.

Despite these efforts, fiscal flexibility remains constrained, as local governments continue to face declining revenue from land sales and slower tax growth. The real estate sector remains a major drag on the economy, with property sales falling by 13 percent year-over-year in 2023. While the government has introduced mortgage rate cuts and re-lending programs to stabilize the sector, recovery is expected to take years. However, the local debt restructuring plan may help ease financial stress on local governments, ensuring that funds are available to maintain public services and economic stability.

To counter these challenges, China is implementing fiscal stimulus and monetary easing. The government is directing funds to strategic industries such as semiconductors, artificial intelligence, and quantum computing to reduce reliance on Western technology. Despite US export restrictions, the semiconductor sector is projected to grow by 10 percent annually. Meanwhile, the People’s Bank of China (PBOC) has lowered borrowing costs, with the 1-year treasury bond yield at 1.08 percent and interbank lending rates at 1.57 percent by the end of 2024. Additionally, China has issued RMB 12.4 trillion (US$1.71 trillion) in treasury bonds and RMB 9.8 trillion (US$1.35 trillion) in local government bonds to support infrastructure and economic development.

However, domestic demand remains fragile, and consumption recovery is still uncertain. While imports in December increased by one percent, the strongest pace since July 2024, they still indicate weak underlying consumer demand. To stimulate household spending and industrial upgrades, the government has launched an RMB 810 billion (US$113 billion) consumer trade-in program, expanding subsidies for home appliances, digital devices, and electric bicycles to boost big-ticket purchases. Additionally, vehicle replacement subsidies now cover older fuel-powered cars, encouraging new car sales.

On the industrial front, RMB 10 trillion (US$1.37 trillion) is being directed toward equipment renewal in manufacturing, workplace safety, and infrastructure projects, supporting business investment and economic rebalancing. The PBOC has optimized re-lending programs, and interest rate subsidies on business loans aim to lower borrowing costs for small and medium-sized enterprises (SMEs).

Meanwhile, the government has pledged to loosen monetary policy further and adopt a more proactive fiscal approach in 2025 to counter external pressures, increase domestic demand, and restore consumer and business confidence. Stronger regulatory oversight and anti-fraud measures are also being implemented to ensure efficient distribution of subsidies and financial support to the intended recipients, preventing market distortions and speculative activity.

The US: Economic strength and uncertainty under a new policy direction

Economic performance and market trends

The US economy expanded by 2.8 percent in 2024, slightly below the 2.9 percent growth in 2023. This growth was driven by consumer spending, business investment, government expenditures, and net exports, though challenges such as a widening trade deficit, slowing investment, and global uncertainty weighed on overall performance.

According to the report, quarterly GDP growth fluctuated throughout the year. In Q3, GDP grew by 3.1 percent, driven by strong consumer spending, increased exports, and rising federal investment. By Q4, growth slowed to 2.3 percent, reflecting weaker investment, declining exports, and slower inventory accumulation.

Consumer spending remained an overall crucial growth driver through out the year, rising 3.8 percent annually, with strong demand in healthcare services, durable goods, and recreation. Investment trends were mixed, with residential investment increased by 4.6 percent, while nonresidential fixed investment, such as business investment in long-term assets, declined by 1.9 percent, particularly in structures and equipment sectors.

Another noticeable driver of this growth was corporate profits fueled by strong performances in the technology sector. Companies such as Apple and NVIDIA posted record revenues, highlighting the continued dominance of high-margin, innovation-driven industries. In the first quarter of fiscal 2025, NVIDIA’s revenue reached US$26.0 billion, marking a 262 percent increase from the same period the previous year. However, the distribution of economic gains has been highly uneven. The top 10 percent of corporations accounted for over 50 percent of total corporate profits, underscoring the increasing concentration of wealth within major firms and raising concerns about market consolidation and income inequality.

While headline economic indicators suggest stability, the long-term sustainability of this growth remains uncertain. Persistently high borrowing costs, labor market tightness, and external risks such as trade tensions and supply chain adjustments could weigh on future expansion. Additionally, rising corporate profits amid slowing wage growth may exacerbate wealth disparities, presenting potential policy challenges for the government in maintaining broad-based economic stability.

Key trade developments and performance

According to the report, in Q4 2024, US exports declined by 0.8 percent, driven by a 5.0 percent drop in goods exports, while services exports increased by 7.2 percent. Imports also fell by 0.8 percent, leading to a slight narrowing of the trade deficit. For the full year 2024, total US exports reached US$3.07 trillion, marking an increase of US$32.4 billion from 2023, while imports totaled US$3.86 trillion, despite a US$127.4 billion decline from the previous year. The trade deficit widened by 17 percent to US$918.4 billion, with record-high imports in December reaching US$364.9 billion.

The exports were led by:

1. Capital goods (e.g., machinery, high-tech equipment).
2. Industrial supplies (petroleum, chemicals, raw materials).
3. Consumer goods (electronics, pharmaceuticals, household products).
4. Automotive (vehicles, parts, engines).
5. Agricultural products (soybeans, meat).

In services, travel (including education spending) was the top export, followed by business services, transport, insurance, and finance.

Import remained strong, with top categories including:

1. Capital goods (foreign technology, machinery).
2. Consumer goods (electronics, clothing, pharmaceuticals).
3. Industrial supplies and raw materials.
4. Automotive sector (foreign vehicles, components).
5. Food imports (fruits, seafood, specialty foods).

The ongoing economic rivalry between China and the US extends beyond trade to investment and technological competition. Supply chain realignments have accelerated, with Vietnam and Mexico emerging as key intermediaries. US imports from Vietnam reached US$142.48 billion in 2024, while Mexico has now surpassed China as the top US trading partner. Additionally, the US has intensified semiconductor export controls, restricting China’s access to advanced AI chips from companies such as NVIDIA and AMD.

Trump administration’s economic policy shifts

The return of Donald Trump to the White House signals a shift toward protectionist and pro-business policies. Trump has proposed a new round of corporate tax cuts, potentially reducing rates from 21 percent to 15 percent, which could stimulate business investment but also exacerbate the federal deficit, which surpassed US$34 trillion in 2024. Trade policies under the new administration are expected to be more confrontational, with potential tariffs on Chinese goods and new domestic manufacturing incentives that could lead to higher production costs and inflationary pressures.

On February 1, 2025, the White House released a fact sheet claiming that, due to the threat posed by illegal drugs, mainly fentanyl, President Trump is implementing a 10 percent additional tariff on imports from China As of March 4, 2025, the tariff rate has reached 20 percent, up from the initial 10 percent rate imposed on February 4. Seemingly prepared for such measures, China responded to the initial 10 percent tariff with duties of 15 percent on US coal and liquefied natural gas and 10 percent on crude oil, agricultural machinery, large-displacement cars, and pickup trucks. After Trump raised the rate to 20 percent, China countered with duties of 10 and 15 percent on various US agricultural products, including cotton, wheat, corn, sorghum, chicken, and soybeans. China has separately implemented export restrictions on critical minerals, such as tungsten, tellurium, bismuth, and molybdenum, which are essential to a range of products and manufacturing processes.

Despite these policies, imports from China and Mexico remained strong, further contributing to trade imbalances.

Debt and real estate risks

In the US, the commercial real estate market is confronting its own set of challenges. The sector faces approximately US$1.5 trillion in maturing debt by 2025, with office vacancy rates reaching 19.8 percent nationally by the end of 2024. Major cities like San Francisco are experiencing even higher vacancy rates, with figures around 36.9 percent. These developments underscore the critical importance of addressing real estate and debt-related risks in both economies to maintain financial stability and sustainable growth.

2025 outlook

As China and the US enter 2025, both economies face uncertainty amid shifting trade policies, structural imbalances, and financial vulnerabilities. While China’s export sector has shown resilience, long-term growth remains constrained by weak domestic demand, high local government debt, and a fragile real estate market. Meanwhile, the US economy continues to outperform other developed markets, but income inequality, high borrowing costs, and commercial real estate risks pose challenges to sustained stability.

The escalation of trade tensions under a new US administration may impact global supply chains in various ways, forcing China to adapt its industrial and trade policies. At the same time, the US faces complex fiscal challenges, balancing corporate growth with rising debt obligations and inflationary risks. The diverging policy approaches of both governments will shape global investment flows, technology competition, and economic alliances in the coming year.

For businesses and investors, staying updated on these shifting dynamics is essential in 2025. China’s policy-driven industrial investments—particularly in semiconductors, AI, and green energy—present long-term opportunities but require navigating regulatory constraints. In the US, market realignments and monetary policy decisions will affect capital markets and corporate profitability, necessitating strategic risk assessment.

As global economic conditions evolve, stakeholders must remain agile and informed, leveraging data-driven insights to anticipate risks and seize emerging opportunities. The coming year will demand strategic adaptability as policymakers, businesses, and investors navigate an increasingly complex and interconnected global economy.