CHINA’S economic growth showed resilience in 2025, expanding at the government’s target of 5.0 per cent for the year, yet underlying weaknesses in domestic demand and structural imbalances suggest a challenging outlook ahead.
The National Bureau of Statistics reported that growth slowed to 4.5 per cent year-on-year in the fourth quarter, down from 4.8 per cent in the previous quarter, reflecting subdued consumption and investment activity.
Reuters reported on Monday that analysts had forecast a 4.4 per cent increase in the fourth quarter, making this the slowest quarterly expansion in three years.
On a sequential basis, the economy grew 1.2 per cent in October to December, slightly above market expectations of 1.0 per cent.
China’s manufacturing sector remained a key driver, underpinned by exporters’ successful diversification away from U.S. markets amid smaller-than-expected tariff hikes.
The country recorded a record trade surplus of nearly $1.2 trillion in 2025, reinforcing the importance of external demand to economic resilience.
Yet this reliance on exports underscores vulnerabilities, particularly as domestic consumption remains weak.
Retail sales in December grew only 0.9 per cent compared with 1.3 per cent in November, while fixed asset investment fell 3.8 per cent over the year, marking the first annual decline since 1989. Property investment slumped by 17.2 per cent, prolonging the real estate sector’s drag on growth.
The slowdown in consumption has been compounded by falling household wealth, low confidence, and persistent deflationary pressures.
Household spending currently accounts for less than 40 per cent of China’s economic output, around 20 percentage points below the global average, prompting policymakers to emphasise the need for structural reform.
Chinese leaders have pledged to significantly increase the share of consumption in GDP over the next five years, while continuing to maintain a “proactive” fiscal policy and easing measures such as sector-specific interest rate cuts.
Despite weak demand, the labour market remained stable, with the nationwide urban survey-based unemployment rate holding steady at 5.1 per cent in December.
Nevertheless, economists warn that long-term risks persist, including an aging population — China’s total population fell by 3.39 million in 2025, the fourth consecutive annual decline — and the continued reliance on exports and investment over domestic consumption.
Global factors, including rising trade protectionism and potential U.S. tariffs on countries trading with Iran, add further uncertainty to the 2026 outlook.
Analysts expect Beijing to again target roughly 5 per cent growth, while accelerating efforts to boost household incomes and strengthen social safety nets to support consumption-led expansion.
“The full-year growth demonstrates resilience, but the slowdown in domestic demand and structural imbalances highlight that China’s economic model remains exposed,” said one economist familiar with the data.
“Policymakers face the dual challenge of maintaining growth while addressing long-term vulnerabilities in investment, property, and population trends.” - January 19, 2026
