China achieved its 5% growth target in 2025, and growth in the fourth quarter was largely in line with market expectations. Resilient exports and strong production were a key support, while services remained a stabilizing factor. However, domestic demand was weak, driven by lower investment, which likely calls for more political support, according to a report by economists at Standard Chartered Bank.
Uneven growth
“China’s GDP grew 4.5% year-on-year in the fourth quarter, meeting the 5% target for 2025. Industrial production was boosted by strong exports, which rose 5.5% for the year, creating a record goods trade surplus of almost 6% of GDP. Net exports contributed 1.6 percentage points to headline growth. The services sector, supported by a strong financial market, also continued to support growth. However, investment declined, with weakness spreading Beyond the housing sector, consumption fell in the fourth quarter as the effectiveness of the commodity trading program faded, despite official data showing strong income growth.
“Deflation eased by the end of the year, but pressures may persist as persistent imbalances between supply and demand could hurt industrial profits and investment. New RMB loans fell sharply to both households and businesses. The decline in housing fixed asset investment deepened, weighing on overall fixed asset investment, while lower housing prices further dampened consumer sentiment.”
“We expect growth of 4.6% for 2026, with the official target likely to be revised to 4.5% to 5.0%. The government appears to be refocusing on long-term economic transformation to achieve sustainable growth. We believe policy support will be provided at the forefront to maintain momentum, while stimulus will focus on high-tech industries, green development, and boosting service sector consumption.”
