China’s National Bureau of Statistics (NBS) reported today that the country’s economy grew by 4.5% in the fourth quarter of 2025, marking the slowest quarterly growth in three years. The figure represents a deceleration from the 4.8% recorded in the third quarter.
Despite the slowdown at the end of the year, China’s economy expanded by 5.0% for the full year 2025, achieving Beijing’s official target of “around 5%.” This growth was largely propelled by a record-breaking export performance, which helped to offset weakness in the domestic property market and subdued consumer spending.
However, some economists question the official figures. Zichun Huang, a China economist at Capital Economics, stated that the official numbers “overstate the pace of economic expansion” by at least 1.5 percentage points.
The 2025 data reveals a widening divergence within the Chinese economy, characterized by strong performance in high-tech manufacturing and exports alongside continued challenges in domestic demand and real estate.
Chinese manufacturers overcame global trade tensions, including renewed US tariffs, by diversifying into emerging markets in Asia, Africa and Latin America. The country reported a record trade surplus of $1.2 trillion in 2025, a 20% increase from the previous year. Industrial output rose 5.2% in December, driven by sectors such as electric vehicles, shipbuilding, and green energy technology.
While manufacturing thrived, Chinese households remained cautious. Property investment fell 17.2% over the year, as declining home prices eroded household wealth. Retail sales growth slowed to just 0.9% in December, despite government subsidies aimed at boosting spending on appliances and vehicles.
China has recently sought to improve relations with key trading partners. Last week, Canada announced a shift away from a 100% tariff on electric vehicle imports, lowering it to 6.1%—in line with its most-favored-nation rate—though an import quota of 49,000 vehicles, increasing to 70,000 over five years, will be enforced. Previously, the European Union and China reached an agreement to replace punitive tariffs on Chinese electric vehicles with a “price undertaking” mechanism, establishing a minimum price floor.
Analysts point to China’s substantial production overcapacity as a key driver of its export growth. Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, cautioned that “China is effectively pushing growth through exports at a loss…Cutting prices may keep volumes up, but it undermines profits and, growth.”
Charu Chanana, chief investment strategist at Saxo, noted that “the fourth-quarter slowdown is the ‘tell’—suggesting China enters 2026 with fading momentum rather than a fresh upswing.”
In response, Beijing is expected to implement more aggressive fiscal stimulus measures in 2026. The central government has signaled a “proactive” stance, focusing on strengthening the social safety net to encourage consumer spending. China has entered its 15th Five-Year Plan period with a shift toward a “moderately loose” monetary policy.
The People’s Bank of China (PBOC) has cut interest rates on all structural monetary policy tools by 25 basis points, lowering the one-year relending rate to 1.25%. An additional 500 billion yuan (~$71 billion) has been allocated to relending facilities, with 1 trillion yuan specifically earmarked for private slight-to-medium enterprises (SMEs). PBOC Deputy Governor Zou Lan indicated that further cuts to benchmark interest rates and the Reserve Requirement Ratio (RRR) are possible later in the year.
Authorities have also reduced the minimum down payment for commercial property mortgages to 30% in an attempt to address the glut of unsold commercial inventory. The government is issuing 62.5 billion yuan ($9 billion) in ultra-long special bonds to fund subsidies for consumers to replace older automobiles, smartphones, and home appliances with newer, greener models.
The 2026 stimulus package is more targeted than previous measures, reflecting the country’s high debt burden. 1.2 trillion yuan has been allocated to technological innovation and industrial upgrades, prioritizing “new productive forces” like artificial intelligence (AI), robotics, and green energy. China’s Ministry of Industry and Information Technology (MIIT) recently released an action plan for the high-quality development of industrial internet platforms (2026–2028), aiming to integrate industrial data with AI to enhance manufacturing competitiveness.
China’s 15th Five-Year Plan (2026-2030) emphasizes the application and scaling of innovation, rather than groundbreaking research. By standardizing and boosting industrial internet platforms, China aims to secure its supply chains and maintain its manufacturing leadership.
