“A surge in exports powered China's growth last year, defying expectations that a trade war with the U.S. would hobble the world's second-biggest economy.
China's gross domestic product expanded 5% last year when adjusted for deflation, according to data released on Monday by the country's National Bureau of Statistics. That met Beijing's official growth target and is in line with the 5% real GDP growth notched in 2024.
Last year's economic performance underscores how China's growth has become increasingly lopsided, creating a global imbalance that has drawn criticism from its own trading partners as well as international institutions.
Exports drove China's economic expansion in 2025 to a degree not seen in nearly three decades, while companies held back on investing and Chinese consumers were reluctant to spend.
"We have an uneven recovery," said Xiangrong Yu, Citi's chief China economist.
Momentum stalled as the year went on, signaling the difficulty of keeping up the pace of expansion in 2026. For the fourth quarter, China said its economy grew 4.5% from the same period a year prior, slowing from 4.8% for the third quarter.
At the beginning of last year, many analysts expected new U.S. tariffs to stifle China's exports and depress growth. Instead, China boosted its exports to markets around the world, more than making up for a drop in trade with the U.S.
"Turned out the trade war didn't really hit China heavily," said Larry Hu, chief China economist at Australian investment bank Macquarie Group.
Exports made up 33% of China's economic growth last year, according to the statistics bureau, the highest share since 1997. Last week, China's customs agency reported a record $1.19 trillion trade surplus for 2025, driven by a 5.5% increase in exports.
Some economists call China's growth two-speed or K-shaped. Exports keep surging, while the property market remains in the doldrums, consumer spending is tepid and much of the economy is struggling with deflation that is eating away at profits and income.
The risk is that Chinese exporters could face resistance from trading partners as governments around the world worry about protecting their domestic industries, leaving China with fewer options to push growth.
The International Monetary Fund has warned that China is too large of an economy to rely on exports for growth, adding that China's manufacturing dominance risks exacerbating global trade tensions.
Investment deteriorated in the latter part of 2025, a worrying sign for an economy that had, for decades, been powered by building skyscrapers, factories and roads.
Gross capital formation, a measure of investment used to calculate GDP, contributed 15% to growth in 2025, the lowest share since 1997, according to data from China's statistics bureau.
Fixed-asset investment -- a different measure of investment that tracks spending on assets such as homes, factories and roads -- fell 3.8% in 2025. That marks the first such annual decline in the data series dating back to at least 1992. Though methodological changes make drawing historical comparisons difficult, the only other period of falling fixed-asset investment occurred during the Covid-19 pandemic.
"The deceleration in fixed-asset investment growth was the most concerning," said Helen Qiao, chief greater China economist at Bank of America.
Local governments have been focused on paying off heavy debt loads, which has curbed infrastructure spending, according to economists.
Investors in the manufacturing sector are being more selective amid an "anti-involution" campaign in China, aimed at reining in excessive competition amid overproduction and muted domestic demand.
China's real-estate malaise stretched into another year, with property investment falling 17% in 2025 from 2024. New construction starts by property developers dropped 20% last year and new home sales by value declined 13%.
Some economists believe the sharp drop in the fixed-asset investment figure may be partly because of previously overstated data. Economists at Goldman Sachs noted other alternative metrics, such as cement production, didn't register the same dramatic slowdown, but rather have declined steadily in the past few years.
Weakening investment could put pressure on Beijing to step up public spending in the coming year, some analysts say. Chinese officials have pledged to stabilize investment with support from the central government.
Meanwhile, Chinese households remain cautious spenders. Retail sales, a key gauge of consumption, rose 0.9% in December from a year prior, down from 1.3% in November, marking the slowest growth since 2022.
The property market continues to weigh on consumer sentiment, since real estate makes up a large portion of Chinese household wealth. Worries about job prospects and wage growth are widespread, according to household surveys. Youth unemployment remains high.
One of China's main initiatives to perk up spending has been a consumer goods trade-in program that subsidizes purchases of items such as washing machines and electric vehicles. That helped boost spending earlier in 2025, but sales have lost momentum as people have made big-ticket purchases that are unlikely to be repeated frequently.
Chinese leaders have pledged to step up initiatives to bolster domestic demand and raise the contribution of consumption to economic growth, including expanding the consumer-goods subsidy program.
Erica Tay, an economist at Malaysian bank Maybank, said improvements in income growth, job prospects and the property market will be necessary to spark a sustained growth in household spending.” [1]
Good China’s exports is bad news for the West. The place of the factory for the world remains taken despite the harshest measures against China taken by the West. The startups in the industry of the West can't compete, if not getting financing from the rest of the world financing production of goods.
China's strong exports, driven by its "world's factory" status, create a competitive challenge for Western industries, especially startups struggling with financing against subsidized Chinese production, despite subsidies, tariffs and trade tensions, forcing the West to lose out, with China shifting focus to developing markets as traditional Western ones face protectionism.
Why China's Exports Persist
Established Ecosystem: China offers a robust manufacturing base with low costs, strong supply chains, and supportive regulations, making it difficult to replicate.
Weak Domestic Spending: A reliance on exports means China's economy needs foreign buyers, giving it an incentive to maintain export competitiveness.
Challenges for the West
Financing Gap: Western startups often can't secure funding to compete with the sheer scale and lower cost of Chinese manufacturing.
Supply Chain Dependence: Many critical products have deep Chinese supply chain dependencies, making onshore production complex.
Trade Measures Ineffective: Subsidies, tariffs and other restrictions haven't fully dislodged China from its dominant role, leading to a defeat.
China's Evolving Strategy
Pivot to Developing Nations: China is increasingly targeting Southeast Asia, Latin America, and other developing regions for its exports, though these markets are also becoming protectionist, much less than the West though.
Strategic Trade: China uses its market power, even restricting key mineral exports (like gallium and germanium), as leverage in trade disputes.
1. World News: Beijing Reports Robust Growth --- Exports fueled 5% rise in GDP last year, defying views that U.S. rift would hurt. Miao, Hannah. Wall Street Journal, Eastern edition; New York, N.Y.. 20 Jan 2026: A6.
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