Exports prop up GDP as domestic demand weakens and housing crisis deepens despite government stimulus
China’s economy expanded by 5 percent in 2025, one of its slowest growth rates in decades, according to official figures released on Monday, highlighting persistent challenges ranging from weak consumer spending to a prolonged property sector crisis.
Although the growth rate met Beijing’s official target of “around five percent,” analysts caution that the headline figure masks deeper structural weaknesses, with economic momentum increasingly dependent on exports rather than domestic demand.
Fresh data from the National Bureau of Statistics (NBS) also showed that growth slowed further in the final quarter of the year, with the economy expanding by 4.5 percent, underscoring the fragile state of recovery.
“The impact of changes in the external environment has intensified,” said NBS chief Kang Yi at a press briefing.
“At the same time, the imbalance between strong supply and weak demand remains prominent, and the economy continues to face both long-standing and emerging challenges.”
Consumers Remain Cautious Despite Stimulus Measures
While officials declared success in meeting the annual growth target, many Chinese households remain wary amid high unemployment and economic uncertainty.
Retail sales, a key measure of consumer activity grew 3.7 percent in 2025, down from 4 percent in 2024. The slowdown was more pronounced in December, when sales rose just 0.9 percent year-on-year, marking the weakest performance since late 2022, when strict zero-COVID restrictions were lifted.
Economists say the fading impact of government subsidies has weighed on consumer spending.
“The decline in sales likely reflects the waning effects of earlier support measures,” said Zichun Huang of Capital Economics, adding that overall data likely overstates the true strength of the economy.
Authorities say more support is on the way. Kang noted that consumption-boosting policies will continue into 2026, including expanded trade-in programs for household appliances and efforts to remove restrictions that limit spending.
Exports Carry the Economy as Industry Shows Modest Gains
Industrial output grew 5.9 percent in 2025, slightly slower than the previous year, though December’s 5.2 percent increase showed some improvement from November.
Factory activity also offered a rare bright spot at year’s end. China’s manufacturing purchasing managers’ index (PMI) edged up to 50.1 in December, moving back into expansion territory for the first time since March.
However, analysts say the modest rebound was largely driven by resilient export demand, not domestic recovery.
“Output growth gained some momentum at the end of the year, but exports remain the main driver,” Huang said.
“We expect growth in 2026 to be at least slightly weaker than in 2025.”
Property Sector Remains a Heavy Drag
China’s once-booming property sector continues to struggle under the weight of a deep debt crisis, despite interest rate cuts and relaxed home-buying rules.
Fixed-asset investment declined 3.8 percent in 2025, reflecting a pullback after years of heavy spending on infrastructure and real estate.
Investment in real estate alone fell a sharp 17.2 percent, signaling continued stress across the housing market.
Trade War Pressures and a Record Surplus
Geopolitical tensions also weighed on the outlook, as the return of Donald Trump to the White House reignited a fierce trade war between the world’s two largest economies.
Although Trump and Chinese President Xi Jinping agreed to a temporary truce during talks in October, data showed Chinese exports to the United States plunged 20 percent in 2025.
That decline, however, was more than offset by strong demand from other regions.
China posted a record trade surplus of $1.2 trillion, described by officials as a “new historical high.”
Exports to ASEAN countries rose 13.4 percent, shipments to Africa surged 25.8 percent, and exports to the European Union climbed 8.4 percent, even as imports from the bloc fell.
Despite mounting challenges at home, exports remain one of the few bright spots in China’s increasingly complex economic landscape
About the Author
