China Q4 Growth Slows to 4.5%
China’s economy grew by 4.5% in the fourth quarter of 2025, marking its slowest quarterly pace in three years, the National Bureau of Statistics (NBS) reported. This represents a slight deceleration from the 4.8% expansion recorded in the third quarter.
Despite a slowdown at the end of the year, China’s economy achieved its annual growth target. In 2025, the world’s second-largest economy grew by 5.0%, meeting Beijing’s goal of ‘around 5%’. This success was primarily driven by record-high exports, which offset weaknesses in the domestic property market and sluggish consumer spending.
Export-Led Growth Masks Domestic Weakness
The 2025 data highlights a growing “K-shaped” divergence within the Chinese economy. High-tech manufacturing and exports reached historic highs, while domestic demand and real estate continued to drag on the national average. Chinese manufacturers defied significant global trade tensions, including renewed US tariffs, by aggressively diversifying into emerging markets in Asia, Africa, and Latin America. The nation reported a record trade surplus of $1.2 trillion in 2025, a 20% increase from the previous year.
Industrial output rose 5.2% in December, led by sectors like electric vehicles, shipbuilding, and green energy technology. While factories hummed, Chinese households remained cautious. Property investment plunged 17.2% over the year, as falling home prices continued to erode household wealth. Growth in retail sales slowed to just 0.9% in December, despite government “trade-in” subsidies designed to spur spending. China’s massive production overcapacity has been fueling these export figures, effectively pushing growth through exports at a loss, which analysts warn is not sustainable.
Analysts Question Official Growth Figures
Some economists believe China is overstating its growth. “We think growth is weaker than official figures suggest,” said Zichun Huang, China economist at Capital Economics. According to Huang, the official numbers “overstate the pace of economic expansion” by at least 1.5 percentage points. This divergence between strong industrial output and weak consumption points to an economy that is reliant on exports for its headline performance.
Analysts warn that relying on exports to carry the economy is a strategy with diminishing returns. However, China has been trying to mend relations with some of its trading partners. Last week, Canada announced that it is replacing its blanket 100% tariffs on electric vehicle imports with a more standard trade framework, lowering the tariff from 100% to 6.1%, in line with the most-favored-nation (MFN) rate.
An import quota of 49,000 would be in place, which would increase to 70,000 over a five-year period. Previously, the European Union (EU) and China reached a consensus to replace punitive tariffs on Chinese electric vehicles with a “price undertaking” mechanism, commonly known as a minimum price floor. This agreement aims to de-escalate a trade war that has simmered since 2024, providing a “soft landing” of sorts for both the European automotive industry and Chinese exporters.
Stimulus Measures and Future Outlook
To address the persistent “real estate drag,” authorities have slashed the minimum down payment for commercial property mortgages to 30%. This move is a direct attempt to reduce the glut of unsold commercial inventory that has weighed on local government balance sheets.
Beijing is extending its popular “trade-in” programs for consumer goods. The government is issuing 62.5 billion yuan ($9 billion) in ultra-long special bonds to fund the first phase of 2026 subsidies. These funds incentivize households to replace aging automobiles, smartphones, and home appliances with newer, greener models. The PBOC has cut interest rates on all structural monetary policy tools by 25 basis points (0.25%). It has lowered the one-year relending rate from 1.5% to 1.25%, effective today. An additional 500 billion yuan (~$71 billion) has been allocated to relending facilities, with a dedicated 1 trillion yuan quota specifically for private small-to-medium enterprises (SMEs).
Strategic Shifts in Industrial Policy
China’s stimulus package is quite targeted this time. Unlike the “bazooka” stimulus packages of 2008 or 2015 that focused on massive infrastructure, the 2026 strategy is surgical. This approach is due to the already high debt burden the country is facing. A massive 1.2 trillion yuan has been earmarked for technological innovation and industrial upgrades. Beijing is prioritizing “new productive forces” like artificial intelligence (AI), robotics, and green energy to move China up the global value chain.
In a major move to solidify its manufacturing prowess, China’s Ministry of Industry and Information Technology (MIIT) recently released a full action plan for the high-quality development of industrial internet platforms (2026–2028). The plan is designed to bridge the gap between China’s massive industrial data and the burgeoning power of AI, aiming to cultivate “new quality productive forces” across the country’s manufacturing environment.
China’s 15th Five-Year Plan (2026-2030) signals a strategic pivot from new innovation to widespread application and scaling. By standardizing and boosting industrial internet platforms, China aims to secure its supply chains against global volatility and ensure its manufacturing sector remains the most competitive and technologically advanced in the world. Mohit Oberoi is a freelance finance writer based in India.
He has completed his MBA in finance as a major. He has over 15 years of experience in financial markets. He has been writing extensively on global markets for the last eight years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.
