China’s economy grew 5% in 2025, so Beijing can claim victory in hitting its annual economic growth target.
But the data under the headlines isn’t nearly as pretty, pointing to an economy that slowed meaningfully into year-end and remains deeply unbalanced.
Let’s start with the positives: Factories and exports.
Industrial output grew 5.9% y/y in 2025, with China’s manufacturing sector surging 6.4%, outpacing the broader industrial sector.
Importantly, high-tech manufacturing accounted for 17.1% of industrial output, the highest share on record, highlighting ongoing progress in industrial upgrading.
With factory output surging, manufacturers relied on foreign demand to absorb excess output.
China’s exports grew 5.5% y/y, and the trade surplus hit a record USD 1.2 trillion, accounting for a third of GDP growth — the highest share in almost two decades.
What makes this trade performance all the more remarkable is that shipments to the U.S. plummeted 20%.
The U.S. accounted for just 11% of China’s exports for the year, a record low.
Instead, exporters diversified into new markets.
Shipments to Africa and ASEAN grew by double digits.
Exports to the EU and Latin America grew by 8% and 7%, respectively.
But even as factories churned out high-tech manufactured goods and exporters shipped them abroad like they were going out of fashion, other parts of China’s economy underperformed.
So, let’s move on to the negatives: Consumption and investment.
Retail sales of consumer goods grew a meager 3.7% y/y in 2025, as consumers remained deeply pessimistic and saving rates stubbornly high.
Households’ propensity to consume – the share of household income allocated to expenditure – now stands at 68.0%, the lowest level on record outside the pandemic.
But it wasn’t all doom and gloom on the consumption front: Retail sales of services grew a punchy 5.5% y/y, suggesting households remain willing to ramp up spending on experiences and day-to-day services, even as they rein in discretionary purchases of durable goods.
While this shift helped cushion overall consumption growth, it wasn’t enough to fully offset weakness in goods demand: Overall, real per capita consumption increased 4.4% y/y in 2025 — less than overall GDP growth — suggesting that consumption’s role in the economy is shrinking.
Meanwhile, fixed asset investment fell 3.8% in 2025 and has now declined for seven consecutive months.
This streak is unprecedented — even outdoing declines posted during the pandemic and the 2008 financial crisis.
As we discussed in a November recap, the investment decline is multifaceted, but real estate is doing the most damage.
Property investment collapsed 17.2% in 2025, the fastest annual decline since the property slump began in 2021.
Meanwhile, developers sold just RMB 7.33 trillion worth of homes across the year, less than half of 2021 levels.
Ouch.
Putting it all together, China’s economy has become a tale of two tracks: A globally competitive export and high‑tech manufacturing base, alongside fragile domestic demand and shrinking investment.
Policymakers have been falling over themselves to signal new action on consumption. So far this month:
Premier Li Qiang let slip that there will be a 15th Five-Year Plan (FYP) on expanding consumption
Vice Minister of Finance Liao Min committed to greater spending on social security
The Ministry of Finance extended and expanded its consumer loan interest rate subsidy program
This is all exciting stuff, but we’ve repeatedly seen Beijing promise to boost consumption and then fail to deliver, weighed down by household caution and broader structural constraints.
For 2026, we are skeptical that these measures alone will spark a meaningful lift in domestic demand.
Our subscribers and clients, however, don’t have to wait and wonder. With a world-class team of China analysts and economists tracking policy signals and market developments in real time, we’ll keep you ahead of the curve on whether Beijing’s push for consumption gains traction — and what it means for the broader economy.
If you’re interested in working with us, shoot us a note at hq@triviumchina.com.
Joe Peissel, Lead macroeconomic analyst, Trivium China
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What you missed
Econ and finance
China’s economy expanded by 5% in 2025 — bang on target. But digging into the details, things look less rosy:
GDP throughout Q4 grew by 4.5% y/y, the slowest quarterly growth rate since the pandemic.
In nominal terms — which incorporates price effects — Q4 GDP grew 3.8% y/y, marking the 11th consecutive quarter that nominal growth has lagged real growth.
Meanwhile, population data showed China’s official headcount was 1.405 billion at the end of 2025, down by more than 3.39 million people from 2024.
Total births fell to 7.92 million, down over 1.5 million compared to 2024.
That translates into a birth rate of just 5.63 births per 1,000 people — breaking the all-time record low rate of 6.39 in 2023.
More support to reduce the cost of starting or growing a family is already on the way, including: full coverage of childbirth costs by public medical insurance funds, free preschool, and subsidies for maternity leave in some localities.
Corporates
On January 16, TCL Zhonghuan — the world’s largest solar wafer manufacturer — announced its intention to acquire a controlling stake in solar module manufacturer DAS Solar.
This would represent the most significant consolidation effort in the solar industry since the post-2023 downcycle.
On January 14, the market regulator (SAMR) announced an antitrust investigation into China’s biggest online travel agency platform Trip.com for abusing its position of market dominance.
Over the past six months, state media and several local hospitality associations have accused Trip.com of lowering hotel listing prices without the property owners’ consent to undercut rival platforms.
The company could face an antitrust fine — typically below 10% of annual revenue.
Chinese automaker Geely has just released its 2030 development roadmap — and boy is it ambitious. The roadmap — released January 22 — targets:
6.5 million units in global auto sales — making it among the top five largest automakers worldwide — with NEVs accounting for 75% and overseas markets over a third of total sales
RMB 1 trillion in annual revenue — nearly triple its expected 2025 revenue
Tech
At a recent press conference, MIIT Vice Minister Zhang Yunming sounded a confident note when asked how to balance China’s efforts to increase AI adoption in the manufacturing sector against the possibility of widespread job losses.
While he acknowledged that the employment question is an “inevitable problem” of AI development, he asserted that “restructuring does not mean disappearance.”
Zhang’s statements are surprisingly understated, given the fact that many Chinese policy pundits expect AI to be a source of major employment upheaval, transforming the very nature of work.
At a Tuesday press conference, Wang Changlin, deputy director of the macro planner (NDRC), floated the idea of setting up a national-level fund for mergers and acquisitions.
China has been struggling with fragmented industries where too many firms compete aggressively in the same space, crushing margins and slowing innovation.
This fund could support consolidation in those crowded sectors, nudging weaker players to merge rather than fight to the death.
Net zero
On January 15, State Grid Corporation of China (SGCC) — China’s largest grid operator — unveiled plans to invest an eye-popping RMB 4 trillion in fixed assets during the 15th Five-Year Plan period (2026-2030) — marking a 40% jump over the previous five years.
China’s breakneck expansion of installed renewable energy capacity since 2022 is pushing the country’s grid infrastructure to the limit.
Renewables curtailment — a direct symptom of grid capacity and flexibility bottlenecks — rose to multi-year highs in 2025, and anecdotal evidence suggests the problem is far worse than official figures indicate.
With a massive pipeline of new renewable projects coming online, these pressures are only set to intensify.
Foreign affairs
Chinese buyers have purchased a massive shipment of Canadian canola following the breakthrough trade deal agreed between Xi Jinping and Canadian Prime Minister Mark Carney on January 16.
The 60,000 metric ton shipment is scheduled for March.
It will be the first since China’s soaring preliminary tariffs on canola went into effect in August.
As it stands, the dumping investigation into Canadian canola must wrap up by March 9 — though we expect it will conclude sooner.
On Tuesday, the European Commission proposed revisions to the Cybersecurity Act that would ban “high-risk third-country suppliers” in critical networks like 5G and public infrastructure.
Although no specific countries or entities are named in the proposal, Chinese companies like Huawei and ZTE are widely understood to be the prime targets.
Several EU member states — including Germany and France — have already implemented Huawei bans, but Commission-level guidance against Huawei is non-binding.
A mandatory bloc-wide rule would be a big step up.
U.S.-China
The Trump administration feels Beijing is holding up its end of the post-Busan trade bargain.
That’s according to US Treasury Secretary Scott Bessent, who met with Chinese Vice Premier He Lifeng on the sidelines of the annual World Economic Forum in Davos, Switzerland.
Bessent said that Chinese exports of rare earth magnets were “flowing as expected” with a “fulfillment rate in the 90s, which I think is quite satisfactory.”
As always, it was a busy week in China.
Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.