China’s economy grew at a rate of 5% last year, according to official data released on Monday, marking one of the slowest expansions in decades. The growth rate, which met the government’s annual target, was driven largely by exports and masked weak consumer spending. National Bureau of Statistics (NBS) official Kang Yi acknowledged the challenges facing the economy, citing the impact of changes in the external environment and the prominent domestic contradiction of strong supply and weak demand.
Despite the government’s efforts to boost consumption, including relaxing fiscal policy and subsidizing the replacement of household items, consumers remain cautious about the wider economy and high unemployment. Retail sales, a key indicator of consumption, slowed to 3.7% last year, with December’s reading coming in at 0.9% on-year, the weakest pace since the end of 2022.
Industrial output expanded 5.9% in 2025, a slight slowdown from the previous year, while the 5.2% increase seen in December was an improvement on November’s pace. However, the decline in sales likely reflects the waning impact of consumer subsidies, according to Zichun Huang of Capital Economics. The overall figures may also “overstate the strength of the economy,” she added.
China’s crucial property sector, once a major driver of economic growth, has failed to overcome a debt crisis despite interest rate cuts and loosened restrictions on homebuying. Fixed-asset investments in China shrank 3.8% in 2025, reflecting a rebalancing following decades of heavy spending on property and infrastructure. The broader housing market remains sluggish, with real estate investment down 17.2% last year.
The return of Donald Trump to the White House and the revival of a fierce trade war between the US and China added to Beijing’s economic challenges. However, robust exports remained a bright spot, with China’s trade surplus hitting a record $1.2 trillion last year. Shipments to the Association of Southeast Asian Nations rose 13.4% year-on-year, while exports to Africa surged 25.8%. Exports to the European Union were also up 8.4%, though imports from the bloc dipped.
The Chinese government is expected to continue implementing policies to boost consumption, including a trade-in scheme for old household appliances. Officials are also keen to point to China’s factory activity, which ticked up slightly in December, providing an unexpected silver lining to an otherwise lackluster year’s end. As the economy continues to navigate challenges, the government’s efforts to stimulate growth and stabilize the property sector will be closely watched.
