China’s economic growth slowed to a three-year low in the fourth quarter as domestic demand softened, and while the full-year pace hit Beijing’s target, trade tensions and structural imbalances pose significant risks to the outlook.
The world’s second-largest economy showed remarkable resilience in 2025, helped by smaller-than-expected U.S. tariff hikes and exporters’ efforts to diversify away from the United States, allowing policymakers to keep stimulus to modest levels. But demand at home further weakened since late last year as confidence has remained low amid a prolonged property crisis.
China’s economy grew 4.5% in the fourth quarter from a year earlier, data from the National Bureau of Statistics (NBS) showed on Monday, slowing from the third-quarter’s 4.8% pace as consumption and investment dragged.
For the whole of 2025, the economy expanded 5.0%, meeting the official target of around 5%. Analysts had forecast 4.9% growth and the economy grew 5.0% in 2024.
Exports Drive Expansion
China’s mighty manufacturing machine provided the much-needed economic lift. The nation last week reported a record trade surplus of nearly $1.2 trillion in 2025, driven by booming exports to non-U.S. markets as producers diversified to offset tariff pressure from Washington.
But the reliance on external demand underscores vulnerabilities in China’s economy, which is grappling with weak domestic spending amid a prolonged property slump and persistent deflationary strains.
On a quarterly basis, GDP grew 1.2% in October-December, compared with a forecast 1.0% increase and a 1.1% gain in July-September.
Industrial Output Up In December, Retail Sales Disappoint
Industrial output rose 5.2% in December from a year earlier, faster than the 4.8% pace in November, while retail sales grew only 0.9%. Fixed asset investment contracted 3.8% in 2025, the first annual drop since data became available in 1996, and property investment slumped 17.2%.
The 2026 outlook is clouded by rising global trade protectionism and U.S. President Donald Trump’s unpredictable policies. China has cut sector-specific interest rates and pledged a “proactive” fiscal stance to lift household consumption, which remains below 40% of output. Falling property prices have eroded household wealth, even as unemployment held at 5.1%.
(With inputs from Reuters)
