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China meets annual growth goal amid trade boom
China's economy expanded by 5% in 2025, matching Beijing's official target, as a record trade surplus helped offset weak domestic demand and a deepening property crisis.
Slowdown in final quarter raises concerns
Growth decelerated to 4.5% in the last three months of the year, down from earlier quarters, highlighting persistent challenges. Analysts describe the economy as "two-speed," with manufacturing and exports driving expansion while consumer spending and real estate lag.
Some economists question the accuracy of official data. Zichun Huang of Capital Economics suggested the figures "overstate the pace of economic expansion" by at least 1.5 percentage points, citing weak investment and consumption.
Demographic crisis deepens as births hit record low
China's population shrank for the fourth consecutive year in 2025, dropping by 3.4 million to 1.4 billion. Births fell to 7.9 million-the lowest since 1949-compounding economic pressures by reducing demand for housing and consumer goods.
Officials have introduced incentives to boost birth rates, but the trend underscores long-term demographic risks.
Exports fuel growth but raise sustainability questions
China reported a record $1.19 trillion trade surplus last week, driven by surging exports to non-U.S. markets. However, economists warn that relying on exports at lower prices to sustain growth is unsustainable.
"China is pushing growth through exports at a loss. Cutting prices may keep volumes up, but it undermines profits and, ultimately, growth,"
Alicia Garcia-Herrero, Natixis Chief Economist for Asia Pacific
Global trade tensions, particularly U.S. tariff threats, add further uncertainty. A temporary pause in U.S.-China tariffs is set to expire in November 2026.
Property slump and weak spending weigh on recovery
China's property sector, once a cornerstone of the economy, continued its decline. House prices fell 2.7% year-on-year in December-the steepest drop in five months-while property investment plummeted 17.2% in 2025.
The crisis has eroded household wealth, with millions left with unfinished or devalued homes, undermining confidence in real estate as a safe investment.
Retail sales grew just 0.9% in December, the slowest pace in three years, though factory output rose to 5.2%, up from 4.8% in November.
Policymakers face balancing act in 2026
After securing the 5% growth target, Beijing appeared to hold back additional stimulus, conserving resources for this year. Leaders have pledged "proactive" policies to restore confidence, but the economy remains fragile.
Kang Yi, head of China's National Bureau of Statistics, acknowledged "strong supply and weak demand" but expressed optimism about maintaining "stable, sound growth momentum."
Analysts say China must navigate a delicate balance: reviving growth through stimulus while managing rising debt and reducing reliance on exports amid volatile trade conditions.
