China’s real GDP growth fell to 4.5% y/y in 4Q25 from 4.8% y/y in 3Q25, in line with a Bloomberg survey, according to UOB Group economist Hu Wei Chen.
Strong industrial production mitigates weak consumption
“Full-year growth of 5.0% in 2025 is in line with the official target and on par with 2024. Final consumer spending and net exports of goods and services contributed 2.6 ppt (2024: 2.2 ppt) and 1.6 ppt (2024: 1.5 ppt) respectively to full-year growth while the contribution from gross capital formation fell to 0.8 ppt (2024: 1.3 ppt). In December, China’s macroeconomic data indicated that growth remained skewed towards exports and industrial production while retail sales and investment continued to be biased lower.
“With continued support for domestic consumption and government investment, we see China’s growth remaining positive albeit slowing moderately to 4.7% in 2026. The impact of US tariffs and a higher base on exports will become more pronounced, but tailwinds from global technology demand may provide some upside. The National People’s Congress (NPC) will set from March 5 a 2026 growth target with current expectations being for officials to repeat the ‘around 5%’ target.
“Given that the benchmark 7-day reverse repo rate was left unchanged in last week’s announcement, banks’ key loan rate fixings are likely to also be fixed this month (fixing on January 20). Our base assumption remains a 10 basis point rate cut and a 50 basis point reserve requirement ratio reduction over the year, bringing the 7-day repo rate, 1-year LPR rate, and 5-year LPR rate to 1.30%, 2.90%, and 3.40%, respectively.”
