January 20, 2026
SHENZHEN – China’s growth slowed in the final quarter of 2025 to its weakest pace since early 2023, underlining challenges for the world’s second-largest economy even as it managed to meet its official target for the year.
A surge in exports despite a trade war with the US helped keep factories humming, and powered China’s gross domestic product (GDP) growth to 5 per cent in 2025.
But that headline figure belies sluggish demand at home, where weak consumption and a long-drawn property slump are weighing on the economic outlook.
Some observers believe China’s growth will moderate in 2026, with the World Bank forecasting 4.4 per cent and the International Monetary Fund, 4.5 per cent.
Official data released on Jan 19 showed that China grew 4.5 per cent in the last three months of 2025 compared with the same period a year earlier.
That figure has dropped every quarter since the start of 2025, with the first quarter registering growth of 5.4 per cent.
China’s statistics bureau chief Kang Yi said the Chinese economy had withstood multiple pressures and maintained steady progress in 2025, but acknowledged that challenges remained.
“Domestically, the contradiction between strong supply and weak demand is pronounced,” he told a press conference in Beijing.
China’s leaders made it their top priority in 2025 to boost domestic demand, but that has appeared difficult to sustain as consumption grew more slowly while investment fell.
Retail sales, a measure of consumption, grew just 0.9 per cent in December, the lowest level since 2022. That figure has declined every month from May, as the effect of a nationwide programme offering subsidies on cars, washing machines and other durable goods waned after people front-loaded purchases and as some localities paused the subsidies when funding ran low.
“It appears that households remain cautious overall, with their savings rate continuing to edge up last year,” said Ms Huang Zichun, China economist at Capital Economics.
Their reluctance to spend has been fuelled by China’s beleaguered property market, which has yet to recover from a downturn, now in its fifth year. Many Chinese households store wealth in properties, whose prices have continued to drop.
In another hit to domestic demand, China recorded a fall of 17.2 per cent in property investment in 2025.
Overall, fixed asset investments – which also include infrastructure and manufacturing – fell 3.8 per cent in 2025, notching their first annual contraction in almost three decades.
Meanwhile, exports emerged as the “unexpected saviour” of the Chinese economy in 2025, said Ms Erica Tay, director of macro research at Maybank.
While a trade war with the US shrank China’s shipments to the world’s largest consumer market by a fifth, China’s manufacturers sent more goods to other markets, ranging from ASEAN to Africa.
Exports logged a full-year increase of 5.5 per cent, leading to a record-high trade surplus of US$1.19 trillion (S$1.53 trillion) and generating a third of China’s economic growth in 2025.
That helped keep production lines turning in China, with industrial production reaching 5.9 per cent for the full year, in stark contrast to the 3.7 per cent growth that retail sales logged.
The year 2025 represented yet another year of “two-speed growth” in China, said Macquarie economists, led by Mr Larry Hu, in a note, pointing to strong exports and manufacturing on one track, and weak consumption and property on the other.
Analysts note that even as China managed to hit its GDP target in 2025 on the back of strong exports, the same may not happen in 2026.
“The exports boost to growth is likely to dip this year, meaning more policy measures to support domestic growth… will be needed to make up for the gap,” said HSBC economists in a note.
One key reason would be adverse reactions from countries whose domestic manufacturers are hurt by Chinese imports.
“The deluge of exports to non-US markets is causing pushback from those countries,” said Maybank’s Ms Tay.
This has already prompted Beijing to phase out some export tax rebates to head off international criticism, a move that will raise some prices and dent shipments, she said.
Chinese leaders have again made boosting domestic demand their top economic priority for 2026 and announced the extension of a consumer subsidy scheme to push sales of durable items.
“How to boost domestic demand – that’s the million-dollar question right now for the Chinese economy,” said Mr Tommy Xie, head of Asia macro research at OCBC Bank.