China’s economy expanded by 5% in 2025, hitting the official growth target and aligning with analyst expectations. But behind the headline number lies a growing imbalance. Export growth was the key engine driving expansion, while domestic indicators reflected weakness, signaling a two-speed recovery that may be hard to sustain.
External trade compensates for internal fragility
Industrial production performed better than expected. Services and exports lifted the economy, with overseas shipments remaining resilient despite persistent global trade tensions and uncertainty surrounding U.S. trade policy under Donald Trump’s administration.
In contrast, domestic consumption and investment underwhelmed. Retail sales grew just 3.7% for the full year, while December’s year-on-year figure was only 0.9%, falling short of forecasts. The property sector continued its slump, entering its fourth consecutive year of decline. Investment in the sector dropped by 17.2%, worse than expected, and new construction starts fell by 20.4%.
Fixed asset investment also turned negative for the first time in decades, down 3.8% year-on-year, contrasting with 3.2% growth in 2024.
Warning signs for 2026
While the full-year GDP figure gives a veneer of stability, quarterly data revealed a slowing trend. Growth decelerated from 4.8% in Q3 to 4.5% in Q4. This pattern points to increasing pressure on Beijing to deploy further stimulus to avoid slipping below the 4.5–5% range targeted for 2026.
Economists from Nomura and Capital Economics expressed doubts over the strength and sustainability of the recovery. Some suggest the real pace of growth may be overstated by up to 1.5 percentage points.
The government has already begun reacting. The central bank cut interest rates last week, and fiscal stimulus is expected to increase. The annual National People’s Congress in March will likely unveil more aggressive economic policy measures to revive momentum.
Structural issues remain
The continued fall in China’s birth rate highlights long-term demographic and structural challenges. Moreover, the country’s reliance on exports makes it vulnerable to external shocks, such as global demand fluctuations and further geopolitical tensions.
Economists suggest that the beginning of China’s 15th Five-Year Plan in 2026 could offer a fresh wave of investment-led growth. Projects delayed in 2025 due to the conclusion of the previous plan may now enter the pipeline, providing some relief.
Additionally, a gradually appreciating renminbi could ease trade tensions with major partners, but also risks reducing China’s export price competitiveness.
Implications for Asia and global markets
China’s trade-centric growth trajectory affects the entire Asian industrial and financial landscape. With Chinese demand still subdued, regional suppliers and partners must recalibrate strategies. Export-reliant economies may benefit in the short term, but the overall stability of Asia’s industrial ecosystem depends heavily on the revival of China’s domestic demand.
As Glosema advises stakeholders across Asia, this complex landscape reinforces the importance of structured market assessment and data-driven scenario planning. Export growth may support short-term optimism, but sustainable expansion will require deeper internal reform and demand recovery.