China’s Growth Holds at 5% in 2025, but Cracks Emerge Beneath the Surface

China managed to keep its economy growing at an annual rate of 5 percent in 2025 despite sustained trade pressure from the United States, according to official data. The headline figure meets Beijing’s long-standing growth target, but a closer look at the numbers suggests that the momentum has become increasingly uneven, with exports carrying much of the burden while domestic demand continues to lag.

Figures released by the National Bureau of Statistics of China show that economic growth slowed markedly toward the end of the year. In the October–December period, the economy expanded by just 1.2 percent quarter-on-quarter, the weakest performance since late 2022. Annual growth in the final quarter fell to 4.5 percent, down from 4.8 percent in the previous quarter, indicating that underlying pressures intensified as the year progressed.

Exports once again played a decisive role in supporting overall growth. China recorded a record trade surplus of nearly USD 1.2 trillion in 2025, allowing the economy to offset weak consumer spending and subdued private investment. However, this export strength was unevenly distributed. Shipments to the United States declined by around 20 percent compared to the previous year, reflecting the continued impact of tariffs introduced under former U.S. President Donald Trump.

Chinese officials argue that the decline in U.S.-bound exports was largely compensated by stronger trade ties with other regions, including parts of Asia, Europe, and emerging markets. The pressure on exporters also eased somewhat after Washington and Beijing agreed to extend a temporary pause in their trade confrontation following discussions between Trump and Chinese President Xi Jinping. Even so, policymakers remain aware that trade relations remain fragile and highly sensitive to political shifts.

Economists caution that reliance on exports as the primary growth engine may not be sustainable in the long run. Lin Song, Greater China chief economist at ING, warns that China could face sharper economic shocks if more countries follow the U.S. in imposing higher import duties. Such a scenario would expose the economy to external risks at a time when domestic demand is not strong enough to absorb the impact.

Within China, long-standing structural weaknesses continue to weigh on growth. The prolonged downturn in the real estate sector has eroded household confidence, while post-pandemic uncertainty has constrained both consumption and private investment. Government initiatives, including subsidies for energy-efficient vehicle replacement and household appliances, have so far failed to gain the momentum needed to spark a broad-based recovery in spending.

According to Chi Lo, senior strategist at BNP Paribas Asset Management, a meaningful rebound in consumption is unlikely unless stability returns to the property market. Housing remains central to household wealth in China, and until price expectations and confidence improve, consumers are likely to remain cautious with discretionary spending.

At the same time, Beijing has placed heavy emphasis on investment in artificial intelligence and advanced manufacturing as part of its long-term development strategy. While these sectors are seen as critical for future competitiveness, analysts note that their immediate impact on employment and household incomes has been limited. Many small businesses and workers continue to face uncertainty, highlighting a growing gap between high-tech investment and everyday economic realities.

Chinese officials maintain that the economy has shown resilience despite multiple challenges. Kang Yi, head of the National Bureau of Statistics, said China achieved “steady progress” in 2025 under complex domestic and external conditions. However, some international analysts remain skeptical, suggesting that actual growth may be lower than official figures indicate, given weak domestic indicators and rising debt burdens.

Looking ahead, economists argue that China must sustain annual growth of around 4 to 5 percent to preserve employment and social stability. Reflecting a more cautious outlook, Deutsche Bank has forecast that China’s economy will grow by just 4.5 percent in 2026. As export momentum shows signs of fatigue, the challenge for Chinese policymakers will be to rebalance growth toward domestic demand without undermining stability in the world’s second-largest economy.