China Meets 2025 Growth Targets as Economic Momentum Cools to Three-Year Low
Beijing, Monday, 19 January 2026.
Despite hitting its 5% annual target, China’s economy slowed to a three-year low of 4.5% in the fourth quarter, exposing critical weaknesses in domestic demand as 2026 begins.
Meeting Targets Amidst Deceleration
On Monday, January 19, 2026, the National Bureau of Statistics (NBS) confirmed that China’s economy expanded by 5.0% in 2025, successfully aligning with the government’s annual growth target [1][2]. The total Gross Domestic Product (GDP) for the year reached 140,187.9 billion yuan, marking a significant milestone as the economy crossed the 140 trillion yuan threshold [2][3]. However, this headline achievement masks a distinct loss of momentum throughout the year. While the annual figure matches the 5% growth recorded in previous years [3], the trajectory of the recovery has shown signs of fatigue, with the fourth-quarter expansion slowing to a three-year low of 4.5% year-on-year [1][2].
Quarterly Slide and Sector Divergence
The data reveals a consistent cooling trend as 2025 progressed. The economy began the year with robust momentum, posting 5.4% growth in the first quarter, but this velocity steadily eroded to 5.2% in the second quarter and 4.8% in the third [2][5]. The deceleration from the year’s peak to its close represents a drop of 0.9 percentage points in the growth rate [5]. Beneath these aggregate numbers, sector performance varied significantly. The tertiary sector (services) outperformed the broader economy with a 5.4% increase, while the secondary sector (industry) grew by 4.5% and the primary sector lagged at 3.9% [5]. Despite the industrial sector’s moderate growth, factory output remained a bright spot, rising 5.2% in December alone [1].
Structural Imbalances: Trade Surplus vs. Domestic Weakness
A stark contrast has emerged between China’s external performance and its domestic demand. The nation reported a record trade surplus of nearly $1.2 trillion in 2025, underscoring how exports have continued to serve as a critical engine for the economy [1]. This reliance on external markets is juxtaposed against softening internal consumption. In December, retail sales managed a growth of only 0.9%, indicating that household spending remains tepid despite government efforts to lift consumption [1]. Furthermore, the investment landscape faced severe headwinds; fixed asset investment contracted by 3.8% over the year—the first annual drop since 1996—driven largely by a deepening crisis in the property sector, where investment slumped by 17.2% [1].
Outlook for 2026
As policymakers navigate 2026, the economic outlook is clouded by both internal structural issues and external geopolitical risks. While Chinese leaders have pledged to maintain a “proactive” fiscal policy and lift household consumption, analysts suggest that exports may still need to drive growth in the near term [1]. However, this strategy faces mounting challenges from rising global trade protectionism. Specifically, the economy faces uncertainty regarding U.S. President Donald Trump’s unpredictable economic policies, which include threats to impose significant tariffs on trading partners [1]. With the jobless rate steady at 5.1% but domestic demand fragile, the ability to balance export reliance with internal revitalization remains the central challenge for the year ahead [1].