China has achieved its annual growth target of 5% last year as the economy weathered an unprecedented trade war with the United States, but growth slowed to a three-year low in the final quarter, dragged down by a series of domestic headwinds. Analysts expressed concern about China’s “lopsided” growth – with robust exports contrasting with soft internal demand – but pointed to the services sector as a “bright spot” as Beijing looks to shore up the economy heading into a new five-year plan cycle. The impressive headline figure came as China’s export sector shrugged off the impact of U.S. tariffs to post a record trade surplus in goods of USD1.19 trillion for 2025, with a decline in shipments to the U.S. more than offset by rapid growth in other markets. The strength in exports helped make up for challenges in other areas, as China continued to grapple with sluggish domestic demand and an ongoing property downturn.
Kang Yi, Commissioner of the Statistics Bureau, said China’s economy had withstood multiple pressures to maintain steady growth in 2025, but cautioned that external pressures were intensifying and many “long-standing problems and new challenges” were affecting economic development. The Chinese economy showed signs of losing momentum towards the end of the year, with GDP expanding by 4.5% year-on-year in the final quarter, down from 4.8% in the previous quarter, the slowest quarterly growth since the final quarter of 2022, when China's economy was still affected by the Covid-19 pandemic. Quarter-on-quarter, China’s economy expanded by 1.2% in the last three months of 2025.
Kang stressed that China’s economic performance should be judged from a holistic, long-term perspective. “We should look not only at current performance but also at the longer term; not only at quarterly changes but also at the full-year trajectory; not only at the overall scale but also at the quality of development,” he said at a press conference. Official data showed that China’s economy became more dependent on exports last year, with net exports accounting for 32.7% of growth – the highest proportion recorded since 1997. Consumption contributed 52% of growth, while 15.3% came from investment. Analysts from the Economist Intelligence Unit’s China team echoed that view, while noting that “the services sector is a bright spot for the economy, underpinned by strong artificial intelligence (AI) and tech investments and robust financial market activities”.
Retail sales, a major barometer of consumption, grew by 3.7% in 2025. In December, retail sales growth slowed to 0.9% year-on-year, down from 1.3% a month earlier. Retail sales in the services sector rose 5.5% year-on-year in 2025, 1.7 percentage points faster than growth in goods sales. Huang Zichun, China Economist with Capital Economics, said the slowdown in retail sales partly reflected the waning impact of Beijing’s trade-in program for consumer goods, which was introduced to boost purchases of home appliances, cars and other products. However, it could also point to a “shift in the composition of spending back towards services”, Huang added. China’s overall fixed-asset investment (FAI) – covering major infrastructure, manufacturing and construction projects – declined by 3.8% compared with the previous year. Property investment shrank by 17.2% year-on-year in 2025, continuing a years-long decline that has weighed on overall growth. Private sector investment also fell by 6.4% last year, while manufacturing investment edged up 0.6%, the South China Morning Post reports.
The China Daily adds that total power usage reached around 10.4 trillion kWh last year, up 5% year-on-year, reinforcing China’s position as the world’s largest energy consumer. “Total power consumption, widely regarded as the ‘barometer’ of economic performance, is now more than double that of the United States and exceeds the combined annual power usage of the European Union, Russia, India and Japan,” said Yang Kun, Executive Vice Chairman of the China Electricity Council. The surge in demand is largely driven by China’s concentrated push into high-end manufacturing and the rapid adoption of electric vehicles and artificial intelligence (AI).
The International Monetary Fund (IMF) has raised its 2026 growth projection for China to 4.5%, up by 0.3 percentage points from its October forecast, primarily due to a combination of eased trade tensions and sustained domestic policy support, according to the organization’s World Economic Outlook update. The improvement reflects the impact of lower effective United States tariff rates on Chinese goods and the continued implementation of stimulus measures over a two-year period, according to the IMF. The economy’s growth rate is expected to decelerate to 4% in 2027 as “structural headwinds assert themselves”.
Beijing Municipality is aiming for a GDP growth of more than 5% in 2026 after becoming one of two Chinese cities to reach a GDP of CNY5 trillion in 2025, Mayor Yin Yong said in the annual regional government work. He said Beijing will deepen coordinated development with Tianjin and Hebei province and push science and technology innovation to new heights in 2026. New research and innovation platforms will be established, including in brain-computer interfaces (BCI) and high-temperature superconductors. The city's Zhongguancun science park will prioritize the development of the artificial intelligence (AI) sector.
