China’s Economy Grows 5% in 2025 Despite Challenges, But Shows Signs of Slowing

China’s economy expanded at an annual rate of 5% in 2025, meeting the government’s official target despite ongoing challenges in the domestic property market and increasing international trade tensions. The growth was largely propelled by robust export performance, though a noticeable slowdown in the final quarter of the year has raised concerns among analysts.

According to government data released Monday, China’s economic growth decelerated to 4.5% in the fourth quarter, marking the slowest quarterly expansion since late 2022 when the country was emerging from stringent COVID-19 pandemic restrictions. This represents a notable decline from the 4.8% growth recorded in the previous quarter.

In quarterly terms, the economy grew by 1.2% from October to December, maintaining positive momentum but at a reduced pace.

The strong export sector has been a crucial lifeline for the Chinese economy, contributing to a record trade surplus of $1.2 trillion. This remarkable performance in international trade has helped compensate for persistent weaknesses in domestic consumer spending and business investment.

The return of Donald Trump to the U.S. presidency early last year and his subsequent implementation of increased tariffs posed significant challenges for Chinese exporters. Data shows that China’s exports to the United States plummeted by 20% in 2025. However, Chinese manufacturers successfully redirected their products to other markets around the world, offsetting the decline in U.S.-bound shipments.

A notable development came when President Trump and Chinese leader Xi Jinping agreed to a temporary truce in their ongoing tariff dispute, helping to alleviate some pressure on China’s export sector. Nevertheless, the success of Chinese exports has prompted defensive measures from other countries seeking to protect their domestic industries, with some governments imposing or threatening to impose new import duties.

“The key question is how long this engine of growth can remain the primary driver,” noted Lynn Song, chief economist for Greater China at Dutch bank ING. “Should more economies also start ramping up tariffs on China, as Mexico has done and the E.U. has threatened to do, eventually, a tighter squeeze will be seen.”

Chinese policymakers have repeatedly emphasized the importance of boosting domestic consumption as a key policy objective, but results have been limited so far. Various stimulus measures, such as a trade-in program for older vehicles and subsidies for home appliance purchases, have shown diminishing returns in recent months.

While these consumer stimulus policies are expected to continue in 2026, analysts at J.P. Morgan Private Bank suggest they may be scaled back compared to their 2025 levels.

“Stabilization, not necessarily recovery, of the domestic property market is key to revive public confidence and, hence household consumption and private investment growth,” explained Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management.

The ongoing challenges in the real estate sector continue to cast a shadow over the broader economy. Since the property market slump began several years ago, Chinese authorities have struggled to contain its ripple effects throughout the economy.

Meanwhile, investments in artificial intelligence and other advanced technologies remain a priority for China’s ruling Communist Party as it seeks to boost self-reliance and compete with the United States in critical tech sectors. However, this focus on high-tech industries has done little to alleviate the economic pressures faced by ordinary citizens and small businesses.

Liu Fengyun, a 53-year-old noodle restaurant owner in southwestern China’s Guizhou province, described the current business environment as increasingly difficult. Her customers frequently mention that “money is hard to earn now” and that “making breakfast at home is cheaper.”

“People all say, ‘The overall environment is not good right now — what more can you expect? People don’t have money anymore. Nothing is easy to do now,'” Liu recounted.

Kang Yi, head of China’s National Bureau of Statistics, attempted to present an optimistic view during Monday’s press conference, stating that China’s economy had sustained “steady progress in 2025 despite multiple pressures” and has “solid foundations” in countering risks.

However, some independent economists and analysts remain skeptical about official Chinese economic data. The Rhodium Group, a respected think tank, suggested last month that China’s actual economic growth in 2025 was likely between 2.5% and 3%, significantly lower than the official figure.

Looking ahead, many financial institutions are forecasting slower growth for China in 2026. Deutsche Bank projects the Chinese economy will expand by approximately 4.5% in the coming year, continuing a downward trend in growth rates that has seen official targets decline from “6% to 6.5% in 2019” to “around 5%” in 2025.

Maintaining social stability through economic growth remains a primary concern for Chinese leadership. Neil Thomas, a fellow at the Asia Society Policy Institute’s Center for China Analysis, notes that while China could probably maintain social stability even with lower economic growth, Beijing “wants the economy to keep growing.”

Thomas added that China likely needs to sustain a roughly 4%-5% annual expansion in order to reach its soft target of $20,000 gross domestic product per capita by 2035, an important milestone in the country’s long-term development plans.