China hits 2025 GDP growth target on export boom, but can’t shake domestic chill

BEIJING - China‘s economy grew 5 per cent in 2025, meeting Beijing’s target on an export boom to offset weak domestic consumption, a strategy that blunted the impact of US tariffs but is increasingly hard to sustain.

Since its property sector crash in 2021, Beijing has guided resources towards the industrial complex rather than consumers to meet ambitious growth targets, creating endemic production overcapacity and forcing factories to look for buyers abroad.

In 2025, China‘s inroads into global markets went further than ever before, leading to a record trade surplus of US$1.2 trillion (S$1.6 trillion), 20 per cent higher than in 2024 and equivalent to the size of a top 20 economy, such as Saudi Arabia.

While shipments to the United States fell by a fifth, they rose sharply to the rest of the world as producers conquered new markets to insulate themselves from US President Donald Trump’s aggressive tariff policies.

“We’re doing well in Europe and Latin America and we don’t need that market,” said Mr Dave Fong, who co-owns three factories in southern China making everything from school bags to climbing gear and industrial machinery. About 15 per cent of his orders used to come from the US, but that is now down to a trickle.

Domestic economy enters ‘cold winter’

But the success of China‘s export-oriented manufacturers contrasts with persistent weakness in the domestic-focused parts of the economy. The data on Jan 19 underscored that divergence: industrial output rose 5.9 per cent in 2025, outpacing retail sales’ 3.7 per cent growth, while property investment slumped by 17.2 per cent.

And unless Beijing is able to redirect resources towards consumers and lift the sectors depending on Chinese spending at home, future economic growth risks slowing sharply, analysts say. While China is expected to target a roughly 5 per cent pace again in 2026, a Reuters poll predicted 2026 growth at 4.5 per cent.

Relying on exports for growth in the longer run is hardly an option. If China‘s trade surplus were to grow every year at the same rate it did in 2025, it would match the size of France’s roughly US$3 trillion economy in 2030 and Germany’s US$5 trillion output in 2033, Reuters calculations show.

“It’s hard to imagine how the trade surplus could continue to expand at this clip indefinitely into the future, if only because that would incur a wider protectionist backlash abroad,” said Gavekal Dragonomics economist Christopher Beddor.

China’s economy grew 4.5 per cent in the fourth quarter from a year earlier, beating analysts’ expectations slightly but slowing to a three-year low from the third-quarter’s 4.8 per cent pace, as consumption and investment dragged.

China‘s economic development in 2025 was “hard-won”, National Bureau of Statistics head Kang Yi said, acknowledging the economy faces problems and challenges including strong supply and weak demand.

Fixed-asset investment shrank 3.8 per cent in 2025, the first annual drop since data became available in 1996 – a sign that local governments are under pressure to reduce debt rather than build new roads and bridges, their usual growth playbook.

Private investment also fell 6.4 per cent as businesses see little reason to expand in an economy marred by overcapacity, where households prefer to save rather than spend.

Mr Scott Yang, who owns a factory making pipe-fitting valves used in real estate and infrastructure projects in eastern China, feels the domestic strains first-hand.

“If real estate is doing poorly, the impact on our whole industry is very large. Same for infrastructure,” Mr Yang said. “It’s hard to quantify, but qualitatively this winter feels piercingly cold.”

Mr Yang said he felt he had no solutions, especially without funds to upgrade the factory’s products: “If our profits in the past few years weren’t very good, where would the investment come from?”

To help small businesses and ease credit access across the economy, the central bank announced last week a targeted monetary policy easing package, including a new one trillion yuan (S$184.5 billion) programme for private enterprises.

But analysts say credit supply has been ample for years and demand is the missing piece.

Beijing’s demand-side policies so far include incremental annual increases on minimum pensions and other welfare items, such as childcare or tuition support – which are also aimed at arresting a demographic decline. Data on Jan 19 showed China‘s population fell for a fourth straight year.

A consumer goods subsidy scheme from 2025 was extended into 2026.

These policies provide insufficient support, analysts say.

“Unless policy pivots more decisively towards households and consumption, growth is likely in the low-4s to mid-4s” in 2026, said Ms Charu Chanana, chief investment strategist at Saxo in Singapore.

Ms Carol Zhang, 36, lost a lucrative job at a tech company a few years ago and only recently found stable employment in e-commerce.

Ms Zhang says the way China pushed back against Mr Trump in 2025 made her “reasonably optimistic” as the economy will cope if trade tensions flared up again. But she remains cautious when it comes to her own outlook.

“When I had more money working in tech I would buy something that was 2,000 yuan, no problem,” she said. “Now I still buy things, but they’re 20 yuan.” REUTERS