China Economic Growth Slows to Three-Year Low Despite Meeting 2025 Target

KEY TAKEAWAYS:

China’s GDP growth slowed to a three-year low in the fourth quarter of 2025.
Full-year growth met Beijing’s official target, helped by strong exports.
Weak domestic demand and property sector stress remain key risks.

China economic growth slows sharply as fresh data shows the world’s second-largest economy losing momentum toward the end of 2025, even as it managed to meet its annual growth target. Fourth-quarter GDP expansion weakened amid sluggish consumption and investment, highlighting structural challenges that could weigh on the outlook in 2026.

According to official figures released on Monday, confidence at home remains fragile despite resilience in exports and manufacturing.

Q4 Growth Hits Three-Year Low

Data from the National Bureau of Statistics showed that China’s economy expanded 4.5% year-on-year in the October–December quarter. This marked a slowdown from the 4.8% growth recorded in the third quarter and was the weakest pace in three years.

Economists surveyed by agency had expected growth of 4.4%, placing the actual figure marginally above forecasts.

On a quarter-on-quarter basis, GDP grew 1.2%, exceeding expectations of a 1.0% increase and improving slightly from the previous quarter’s 1.1% rise.

Full-Year Growth Meets Beijing’s Target

For the full year 2025, China’s economy expanded 5.0%, in line with the government’s target of “around 5%.” The outcome also matched growth recorded in 2024 and slightly exceeded analysts’ expectations of 4.9%.

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Officials credited export resilience and manufacturing strength for helping stabilise growth while keeping stimulus measures relatively restrained.

Exports Drive Growth as Domestic Demand Weakens

China’s manufacturing sector continued to provide a crucial lift. The country recently reported a record trade surplus of nearly $1.2 trillion in 2025, driven by surging exports to non-US markets as firms diversified supply chains.

However, this growing reliance on external demand underscores underlying vulnerabilities. Domestic consumption and private investment have softened further since late 2024, weighed down by a prolonged property downturn and weak consumer confidence.

Property Slump and Deflationary Pressures Persist

Falling property prices have eroded household wealth, dampening spending appetite. Household consumption accounts for less than 40% of China’s economic output around 20 percentage points below the global average highlighting the imbalance in growth drivers.

Chinese leaders have pledged to significantly raise the share of household consumption over the next five years, though no specific targets have been announced.

Calls for Consumption-Led Growth Intensify

Analysts say boosting household incomes and strengthening social security will be critical to reducing precautionary savings and reviving demand. Despite subdued consumption, employment data has remained stable, with the urban jobless rate holding steady at 5.1% in December.

International institutions such as the World Bank and the International Monetary Fund have repeatedly urged China to pivot toward consumption-led growth, warning that overreliance on exports and investment poses long-term economic risks.

As trade tensions persist and domestic imbalances deepen, economists caution that sustaining growth in 2026 may prove more challenging without deeper structural reforms.