China’s economy grows 5% in 2025

Key Concepts

• GDP Growth: China’s Gross Domestic Product growth rate, currently at 5% in 2025, with slowing trends.
• Trade Surplus: China’s record $1.2 trillion U.S. dollar trade surplus driven by new export markets.
• Domestic Consumption: Efforts to shift China’s economic driver from exports to internal consumer spending.
• Population Decline: China’s ongoing population decrease, currently down 3.39 million.
• Fixed Asset Investment: Decline in investment, particularly in the property sector, marking the first annual drop since 1989.
• Five-Year Plan: China’s upcoming development plan outlining goals from 2024-2029.

China’s Economic Performance and Future Outlook

China experienced significant economic growth in the past year, achieving a 5% GDP growth in 2025, largely fueled by a record $1.2 trillion U.S. dollar trade surplus. This surplus was a direct result of Chinese exporters successfully finding new markets amidst ongoing trade tensions with the United States. However, sustaining this growth rate presents challenges.

Slowing Growth & Consumption Concerns

While the overall GDP growth was strong, the fourth quarter of the year saw a slowdown, with GDP growth decreasing to 4.5% compared to the same period the previous year, down from 4.8% in the preceding quarter. The government is actively attempting to transition the economy towards domestic consumption as a primary growth driver. Despite implementing subsidies and incentives aimed at boosting retail sales, growth in this sector fell to 3.7% in the last year, a decrease from 4% in 2024. December’s retail sales figure was particularly weak, registering only 0.9% year-on-year growth – the lowest rate since late 2022.

Demographic Challenges

Efforts to stimulate consumption are further complicated by a continuing demographic trend: population decline. China’s population has decreased for the fourth consecutive year, falling by 3.39 million to a total of 1.405 billion people. Authorities are exploring strategies to sustainably increase household incomes, including Social Security reforms, increased fiscal transfers, and improved provision of public services, to encourage consumer spending.

Bright Spots & Investment

Despite the challenges, there are areas of positive development. Investment in artificial intelligence and technology is showing promise, with economists forecasting 4.6% growth in this sector for the coming year. This growth is predicated on a continued, albeit potentially moderate, performance from the export sector and a gradual recovery in overall investment.

Government Targets & External Factors

The government’s growth target for 2026 is anticipated to be around 5%, potentially signaling a more aggressive stimulus package. The economic outlook is also heavily dependent on the continuation of the current trade truce with the United States, which is set to expire at the end of the year.

Property Sector & Investment Decline

The property sector remains a significant drag on the economy. Fixed asset investment experienced its first annual decline since 1989, falling by 3.8% last year. All eyes are now on potential policy measures that may be announced to address this issue.

The Five-Year Plan

China is preparing to unveil details of its new Five-Year Plan, which will outline development goals for the period from 2024 to 2029. This plan will receive full approval when the legislature convenes during the annual “Two Sessions” in March.

Synthesis

China’s economic trajectory is currently at a crossroads. While strong export performance drove growth in the recent past, sustaining this momentum is proving difficult. Challenges related to slowing domestic consumption, a declining population, and a struggling property sector necessitate a shift in economic strategy. The success of this transition, coupled with external factors like the US trade relationship and the implementation of the new Five-Year Plan, will determine China’s economic performance in the coming years.