Despite the U.S.-China tariff war in 2025, China's gross domestic product (GDP) grew 5%, meeting the government's target. A major factor was the successful diversification of exports to avoid U.S. tariff pressure. However, prices fell for the longest stretch in about 30 years, and investment in fixed assets posted the first annual decline in roughly three decades. As this year marks the start of the 15th Five-Year Plan (2026–2030), stimulus measures to boost domestic demand are expected to emerge at the upcoming "Two Sessions" (National People's Congress of China and Chinese People's Political Consultative Conference).
According to the National Bureau of Statistics of China on the 19th, fourth-quarter GDP last year was 38.79 trillion yuan (about 8,224.6437 trillion won), up 4.5% from a year earlier. The growth rate slowed from the previous quarter (4.8%), hitting a three-year low. Still, stronger growth in the first and second quarters brought full-year growth to 5%, achieving the government's goal of "around 5% growth for the year."
Exports drove economic growth. To avoid U.S. tariff pressure, China reduced its reliance on exports to the United States and diversified its export markets, resulting in a record trade surplus of about $1.19 trillion (about 1,755.6070 trillion won) last year. Exports to Africa, Southeast Asia, the European Union (EU), and South America rose 26%, 13%, 8%, and 7%, respectively, while exports to the United States plunged 20% over the same period. Supporting this, industrial production in December rose 5.2% year over year, beating expectations for a 5% increase.
However, weak domestic demand amid the property crisis and deflationary pressure remains unresolved. Investment in fixed assets fell 3.8% on an annual basis in 2025, marking the first yearly decline since 1989. Annual real estate investment dropped 17.2%. Prices declined for 11 consecutive quarters, marking the longest deflation since the mid-1990s. Retail sales in December rose just 0.9%, below the market consensus of 1.2% compiled by Reuters.
Meanwhile, the fertility rate in 2025 hit a record low, deepening the burden of demographic challenges. The number of births per 1,000 people last year was 5.63, well below the previous low (6.39 in 2023). China's fertility rate plunged from the mid-2010s and hit a low in 2023 before rebounding slightly in 2024, but it fell sharply again in 2025, revealing that the rise in 2024 was a temporary phenomenon rather than a sustained trend. Despite the 2016 abolition of the "one-child policy," the accelerating aging problem is expected to increase the economic burden due to a shrinking workforce and a growing number of pension recipients.
Markets are focused on the Two Sessions slated for early March. The Two Sessions are China's largest annual political event, where this year's economic targets will be presented. China is expected to again set a "5%" growth target this year. The Financial Times (FT) said, "This year also marks the start of China's 15th Five-Year Plan (2026–2030)," adding, "Economists expect the central and local governments to show strong determination to lift growth sharply from the beginning of the year through various stimulus measures."
The Chinese government is expected to put particular effort into boosting domestic consumption. Reuters said, "China's leadership has pledged to significantly increase the share of household consumption in the economy over the next five years," adding, "China's household expenditure does not reach even 40% of annual economic output, about 20 percentage points below the global average. Economic experts said China needs to strengthen its fragile social safety net to spur household consumption and curb excessive precautionary savings."