Economic Indicators and China's GDP, FDI, and Trade Trends

China ended 2025 having met its official growth target, bringing the 14th Five-Year Plan period to a steady close. According to data released by the National Bureau of Statistics in January 2026, GDP expanded by 5.0 percent year on year, reaching approximately RMB 140.2 trillion (US$19.6 trillion), despite ongoing domestic demand softness and external uncertainty. Growth momentum moderated over the year, easing from 5.4 percent in the first quarter to 4.5 percent in the fourth quarter, reflecting the fading impact of earlier stimulus measures and a more cautious policy stance focused on stability and risk management rather than aggressive short-term expansion.

For foreign investors, the significance of the 2025 data lies less in the headline growth figure and more in the underlying composition of growth and policy signals ahead of the 15th Five-Year Plan period (2026–2030). The services sector remained the primary growth engine, expanding by 5.4 percent, while industrial and agricultural output recorded more moderate gains. At the same time, industrial upgrading continued, with stronger performance in equipment manufacturing and high-tech segments, alongside solid growth in information technology and business services. These trends indicate a continued structural shift toward higher value-added activities, modern services, and greater integration with external markets.

Consumption growth remained moderate, investment was constrained by weakness in real estate and infrastructure, and trade provided incremental support through steady export growth. Inflation remained subdued and labor market conditions broadly stable, reinforcing the picture of controlled, low-pressure expansion. As China transitions into the next planning cycle, the 2025 results suggest a policy environment centered on gradual rebalancing, productivity enhancement, and selective support for strategic industries rather than broad-based stimulus.

Foreign direct investment remains a key indicator of China’s integration with global markets, but the 2025 data presents a mixed and nuanced picture. In the first ten months of the year, actual FDI inflows reached RMB 621.93 billion, a year-on-year decline of 10.3 percent, even as the number of newly established foreign-invested enterprises rose by 14.7 percent to 53,782. Full-year figures confirm a third consecutive annual contraction in inflows, reflecting persistent global uncertainty and cautious corporate capital allocation. At the same time, the continued rise in new company registrations suggests that multinational firms still view China as strategically indispensable, favoring phased market entry and longer-term positioning rather than large, upfront commitments.

Sectoral patterns point to both stability and structural upgrading. Services remained the dominant recipient of foreign capital, accounting for more than 70 percent of inflows, supported by liberalization in areas such as finance, logistics, professional services, and digital services. Manufacturing continued to attract steady investment, reinforcing China’s role as a core global production and supply-chain hub aligned with policies promoting higher-end, intelligent, and green manufacturing. The most dynamic segment, however, was high-tech industries, which captured roughly one-third of total FDI. Strong growth in e-commerce services, medical equipment, and aerospace manufacturing highlights investor alignment with China’s innovation-driven development strategy and expanding domestic demand in advanced and technology-intensive sectors.

From a geographic perspective, traditional investment partners in Europe demonstrated resilience, with inflows from countries such as the United Kingdom and Switzerland recording solid growth, reflecting ongoing cooperation in high-end manufacturing, finance, biotechnology, and technology services. At the same time, the Middle East—particularly the United Arab Emirates—emerged as a fast-growing source of capital, driven by Gulf diversification strategies, sovereign investment activity, and alignment with China’s priorities in renewable energy, infrastructure, and digitalization under the Belt and Road framework. These shifts are gradually diversifying China’s FDI source base and reducing reliance on a narrow group of traditional markets.

Looking ahead, China’s FDI environment is shaped by both material headwinds and durable opportunities. Global economic fragility, geopolitical tension, and intensified competition for capital continue to constrain large-scale investment flows, while domestic structural adjustment requires more selective alignment with industrial upgrading and sustainability goals. However, China retains powerful long-term advantages, including unmatched market scale, a comprehensive industrial ecosystem, improving regulatory transparency, accelerating innovation capacity, and strong momentum in green transformation. For investors, the opportunity set increasingly concentrates in high-value services, advanced manufacturing, digital technologies, healthcare, and clean energy, where policy support, market demand, and technological upgrading converge. Strategic positioning, disciplined risk management, and local partnership development will be decisive for capturing sustainable returns in this evolving landscape.

China’s external sector continued to provide a stabilizing counterweight to soft domestic demand. Total goods trade reached RMB 45.47 trillion (US$6.36 trillion) in 2025, representing year-on-year growth of 3.8 percent. Exports increased to RMB 26.99 trillion (US$3.77 trillion), up 6.1 percent, while imports rose only marginally to RMB 18.48 trillion (US$2.58 trillion), up 0.5 percent. This divergence underscores the economy’s reliance on export momentum to offset subdued internal absorption and investment activity.

Higher-value exports were a key driver of resilience. Shipments of high-technology products surged by 13.2 percent, signaling improving competitiveness in advanced manufacturing and green-related industries. Trade with Belt and Road partner economies expanded by 6.3 percent and accounted for more than half of total goods trade, reflecting a continued diversification of export markets and reduced dependence on traditional destinations. At the same time, private enterprises strengthened their role in external trade, with their imports and exports rising 7.1 percent and their share of total goods trade increasing to 57.3 percent, highlighting the growing contribution of market-oriented firms to China’s external integration.

Price dynamics and labor conditions pointed to a broadly stable macro environment. Consumer inflation was essentially flat over the year, while producer prices remained in deflationary territory despite modest late-year improvement. Core inflation edged higher but remained subdued, indicating limited pricing power across most sectors. Employment conditions were steady, with the surveyed urban unemployment rate averaging 5.2 percent and real per-capita disposable income rising by 5.0 percent, supported by faster income growth in rural areas. The combination of low inflation and stable employment suggests that policymakers retain flexibility to deploy targeted fiscal and monetary measures in 2026 should domestic demand remain under pressure.