The slowdown in the economic growth of China was the lowest in almost three years in the fourth quarter as domestic demand faded, although the growth in the year was as strong as Beijing had aimed to achieve, despite the rising trade frictions with the U.S and a long-term real estate downturn.
Information released by the National Statistics Bureau on Monday revealed that gross domestic product expanded by 4.5 percent in the October-to-December period. The downturn from 4.8 percent in the third quarter was the weakest reading since the first quarter of 2023, when expansion followed at 4.5 percent.
The annual economic growth was at 5 percent, which was within the official expectations of about 5 percent. Other December data reported that domestic consumption weakened and the investment decline steepened, while manufacturing improved.
Retail sales increased 0.9 percent in December from the previous year, falling short of economists’ expectations for 1.2 percent growth and slowing from 1.3 percent in the previous month.
According to Wind Information, the gauge of consumption was down 1.8 percent year-on-year, which was the slowest growth since December 2022. The industrial production has surged by 5.2 percent in December, surpassing the expectations of a 5 percent growth, and an increase of 4.8 percent last month.
The fixed-asset investment that encompasses real-estate investment fell by 3.8 percent in the previous year, more than economists had predicted, according to a 3 percent decline in a Reuters poll.
Property development investment remained slumping, with a real estate crisis persisting, declining by 17.2 percent in 2025, exacerbating the previous year’s fall of 10.6 percent.
However, the urban unemployment rate remained unchanged at 5.1 percent in December. The mainland Chinese CSI 300 rose 0.6 percent after the data release before paring back gains, while Hong Kong’s Hang Seng Index dropped 0.8 percent. LSEG data indicated that the offshore yuan gained marginally to 6.9604 against the U.S. dollar, the best it has ever been since May 2023.
The statistics bureau said in an official English language release, “We must adopt more proactive and effective macro policies (and) continue to expand domestic demand.”
The second-largest economy in the world demonstrated resilience in 2025, widely due to smaller-than-anticipated tariff rates and the effort by exporters to diversify beyond the U.S., enabling policymakers to hold off the rollout of massive stimulus.
China recorded a historic trade surplus of close to $1.2 trillion last year due to extreme exports to non-U.S. markets as manufacturers redirected shipments to avoid increased U.S. tariffs.
Managing Director of OCBC Bank, Tommy Xie, added that the anticipated drag from front-loaded shipments, tighter transshipment controls, and currency appreciation has been limited. Xie forecasts that the exports of China will increase by about 3 percent in 2026.
Statistics bureau director Kang Yi informed reporters on Monday that the net exports of China were approximately one-third of the GDP in 2025, as the consumption took 52 percent of the economic output.
Therefore, the exports still had to contend with headwinds. U.S. President Donald Trump has threatened to impose a 25 percent tariff on those countries that do business with Iran, such as China, and the trade truce between Washington and other countries is bound to expire later this year.
The imbalance of trade in China has also attracted its share of disapproval among trading partners who have been keen on protecting their own local industry against the onslaught of low-cost Chinese products.
Economists have demanded economic reforms to change the growth model to be more domestic consumption-based and less dependent on exports and investment, citing that the existing growth model is a long-term risk.
Eswar Prasad, a professor of trade policy and economics at Cornell University, stated, “Plunging investment and weak household consumption have made the Chinese economy increasingly reliant on exports to power growth, a situation that is untenable for China as well as the world economy.”
Beijing has attempted to contain surplus factory capacity and cut-throat price competition. Consumer inflation rose at its steepest rate in almost three years to 0.8 percent in December, and producer prices fell 1.9 percent.
Chief China economist at Macquarie, Larry Hu, indicated that the GDP deflator, which is the widest price index of goods and services in China, has been in the negative since 2023, and will continue to decline by 0.5 percent in 2026 in the longest such streak in history.
The economy is grappling with ineffective domestic consumption in the face of a long-lasting property downturn and ongoing deflationary pressures. The new bank loans in 2025 fell to their lowest point in seven years at 16.27 trillion yuan ($2.33 trillion), highlighting weak borrowing demand and suggesting that the government needs additional stimulus.
The People’s Bank of China announced last week that a set of credit-easing actions, such as a reduction in the rates of the most common lending instruments by 25 basis points, and an increase in quotas of lending programs providing support to major industries, such as agriculture, technology, and private enterprises.
Goldman Sachs economists forecast the central bank will reduce the reserve requirement ratio by 50 basis points and the policy rate by 10 basis points in the first quarter.
