China's economy expanded at a 5% annual pace in 2025, meeting the government's target on the back of strong exports despite U.S. President Donald Trump's tariffs.
However, gross domestic product (GDP) growth slowed to a 4.5% rate in the last quarter of the year, the government said Monday.
That was the slowest quarterly growth since late 2022, when China was beginning to loosen stringent COVID-19 pandemic restrictions. The economy, the world’s second largest, grew at a 4.8% annual pace in the previous quarter.
China’s leaders have been trying to spur faster growth. Since its property sector crash in 2021, Beijing has guided resources toward the industrial complex rather than consumers to meet ambitious growth targets, creating what is seen as production overcapacity and forcing factories to look for buyers abroad.
As expected, annual growth last year was in line with the government’s official target for an expansion of "around 5%."
In quarterly terms, the economy grew 1.2% in October to December.
Strong exports helped to compensate for weak consumer spending and business investment, contributing to a record trade surplus of $1.2 trillion, 20% higher than in 2024 and equivalent to the size of a top 20 economy, such as Saudi Arabia.
Chinese exports to the U.S. suffered after President Donald Trump returned to office early last year and began raising tariffs. But that decline was offset by shipments to the rest of the world. Soaring imports of Chinese goods are leading some other governments to take action to protect local industries, in some cases raising import duties.
"We're doing well in Europe and Latin America and we don't need that market," Reuters quoted Dave Fong, who co-owns three factories in southern China making everything from school bags to climbing gear and industrial machinery, as saying. About 15% of his orders used to come from the U.S., but that's now down to a trickle.
Trump and Chinese leader Xi Jinping agreed to extend a truce in their bruising tariff war, also helping to alleviate pressure on China’s exports. But China's exports to the U.S. still fell 20% last year.
"The key question is how long this engine of growth can remain the primary driver," Lynn Song, chief economist for Greater China at Dutch bank ING, wrote in a recent note. "Should more economies also start ramping up tariffs on China, as Mexico has done and the EU has threatened to do, eventually, a tighter squeeze will be seen."
But the success of China's export-oriented manufacturers contrasts with persistent weakness in the domestic-focused parts of the economy. Monday's data underscored that divergence: industrial output rose 5.9% in 2025, outpacing retail sales' 3.7% growth, while property investment slumped by 17.2%.
And unless Beijing can redirect resources toward consumers and lift the sectors depending on Chinese spending at home, future economic growth risks slowing sharply, analysts say. While China is expected to target a roughly 5% pace again this year, a Reuters poll predicted 2026 growth at 4.5%.
Relying on exports for growth in the longer run is hardly an option. If China's trade surplus were to grow every year at the same rate it did in 2025, it would match the size of France's roughly $3 trillion economy in 2030 and Germany's $5 trillion output in 2033, Reuters calculations show.
China’s leaders have repeatedly highlighted boosting domestic demand as a policy focus, but their efforts have so far been limited. A trade-in program for drivers to replace older cars with more energy-efficient models, for example, has been losing steam in recent months.
"Stabilization, not necessarily recovery, of the domestic property market is key to revive public confidence and, hence, household consumption and private investment growth,” said Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management.
China has also provided trade-in subsidies for home appliances such as refrigerators, washing machines and TVs. While major consumer stimulus policies in 2025 – including such subsidies – are set to continue in 2026, they may be scaled back, Weiheng Chen, global investment strategist at J.P. Morgan Private Bank, said in a recent note.
Meanwhile, investments in artificial intelligence and other advanced technologies remain a key priority for China’s ruling Communist Party as it moves to boost self-reliance and rival the U.S.
China's economic development in 2025 was "hard-won," said Kang Yi, the NBS head, on Monday, acknowledging the economy faces problems and challenges, including strong supply and weak demand.
