China Posts Weakest Growth in Three Years as Domestic Spending Declines

TLDR

• China’s Q4 2025 growth dropped to 4.5%, lowest in three years
• Trade surplus hit a record $1.2T in 2025
• Exports to the US fell 19.5% while global markets expanded
• Domestic consumption and investment remained weak throughout the year

China’s economy slowed to its weakest pace in three years, expanding just 4.5% in the final quarter of 2025. This downturn came even after the lifting of U.S. trade war tariffs, which had been a major barrier to growth in previous years. While the country’s export performance reached record highs, weak domestic consumption and stagnant investment continued to weigh heavily on overall economic activity.

China’s Growth Slows as Domestic Economy Struggles

China’s gross domestic product grew by 5% in 2025, matching the official target set by Beijing. But the last quarter showed clear signs of weakening momentum, with growth slowing to 4.5% the lowest since 2022.

Despite the rollback of trade restrictions from the United States, the Chinese economy remained under pressure from within. Consumer confidence stayed low, and businesses reported reduced activity in retail, property, and manufacturing. Many families spent less due to slower income growth and falling prices.

Private sector confidence also weakened. Businesses became more cautious with investments, especially in real estate and infrastructure. This added to concerns about the country’s long-term ability to maintain steady economic performance without relying on exports.

Exports Support Growth but US Trade Declines

China’s exports were a major source of support in 2025, helping to offset weakness in domestic sectors. The country recorded a record annual trade surplus of $1.2 trillion. This came even as exports to the United States dropped by 19.5% due to tariffs introduced during Donald Trump’s presidency.

Chinese exporters expanded into new markets across Southeast Asia, Latin America, Europe, and Africa. Demand remained strong for electric vehicles, solar energy products, lithium batteries, and industrial equipment.

Officials praised this shift as proof that China’s export sector could adapt quickly. They also pointed to manufacturing scale and production efficiency as key reasons for global demand, while denying claims of industrial overcapacity or unfair pricing.

Weak Spending and Investment Remain a Concern

Despite strong trade numbers, domestic demand did not improve in 2025. Deflation caused many consumers to delay spending in hopes of lower prices later. Retailers and restaurants struggled with lower foot traffic and falling revenues.

Housing sales were also weak. Many developers paused new projects, and construction slowed across major cities. Fewer families purchased homes, and urban demand stayed limited.

Investment in fixed assets like buildings, machinery, and equipment either stayed flat or declined. Business leaders hesitated to expand due to concerns over slowing demand and uncertain market conditions.

Policy Measures and 2026 Economic Outlook

To support the economy, China’s central bank cut interest rates for certain industries, such as agriculture and technology. Officials have also begun preparing new stimulus measures to boost consumption and support small businesses.

Experts suggest that China’s growth could stay near 4.5% in 2026 unless domestic activity recovers. Export reliance remains high, and new trade restrictions from global partners could create more difficulties.

While China’s export performance is expected to remain strong, leaders in Beijing have acknowledged the need to shift toward a more balanced growth model. Without stronger household and business spending at home, maintaining stable growth may become increasingly difficult.

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