China’s Economy in 2025: GDP Reaches 5.0% Growth Despite Challenges

Industrial production and manufacturing upgrades provided support

Industrial production remained one of the more resilient components of China’s economy in 2025. Value‑added industrial output grew by 5.9 percent year‑on‑year, with manufacturing outperforming the broader industrial sector. Notably, equipment manufacturing and high‑technology manufacturing recorded growth of over 9 percent, significantly exceeding the national average.

Output growth was particularly strong in advanced manufacturing segments such as industrial robotics, 3D printing equipment, and new energy vehicles, highlighting the effectiveness of China’s industrial upgrading strategy. Toward the end of the year, industrial sentiment also showed signs of stabilization, with the official manufacturing purchasing managers’ index (PMI) returning to expansion territory in December.

For investors, these developments reinforce the policy‑anchored nature of China’s manufacturing transformation and suggest continued support for technologically intensive and capital‑efficient industries in the medium term.

Services sector performance remained uneven but expanding

The services sector continued to expand at a relatively faster pace than overall GDP growth, reflecting China’s gradual economic rebalancing. Modern services such as information transmission, software and IT services, leasing and business services, and logistics recorded double‑digit or near‑double‑digit growth, illustrating rising demand for producer and technology‑enabled services.

However, some consumer‑facing service industries exhibited more moderate growth, particularly in the second half of the year, as household spending remained cautious. Business activity indicators suggest that while service sector expansion is ongoing, momentum remains uneven across sub‑sectors.

Consumption recovery continued, though at a moderate pace

Domestic consumption showed gradual improvement in 2025 but failed to emerge as a strong growth engine. Total retail sales of consumer goods rose by 3.7 percent year‑on‑year to RMB 5.01 trillion (US$7.0 trillion), with services and online consumption outperforming traditional goods‑based retail.

Retail sales growth remained uneven across regions and product categories. Urban retail sales, accounting for approximately 86 percent of the national total, increased by 3.6 percent, while rural retail sales rose slightly faster at 4.1 percent, albeit from a smaller base. The data suggests continued consumption recovery outside major cities, though urban areas remain the dominant consumption centers. By consumption type, goods‑based retail sales grew 3.8 percent year‑on‑year to RMB 4.43 trillion (US$6.2 trillion), outpacing catering revenue, which increased 3.2 percent to RMB 580 billion (US$81 billion).

Within goods consumption, both essential items and selected “upgrade” categories performed relatively well. Retail sales by above‑designated‑size enterprises expanded strongly in:

• Communications equipment (+20.9%)
• Cultural and office supplies (+17.3%)
• Sports and entertainment goods (+15.7%)
• Home appliances and audiovisual equipment (+11.0%)
• Grain, oil, and food products (+9.3%)

This pattern points to a combination of replacement demand, digital consumption habits, and policy‑supported appliance upgrades, alongside resilient spending on daily necessities.

E‑commerce remained a key driver of consumption growth. Online retail sales totaled RMB 1.60 trillion (US$224 billion), rising 8.6 percent year‑on‑year. Of this, online sales of physical goods reached RMB 1.31 trillion (US$183 billion), growing 5.2 percent and accounting for 26.1 percent of total retail sales, highlighting the entrenchment of online channels in China’s consumer landscape.

Separately, services retail sales increased 5.5 percent year‑on‑year, outperforming overall retail growth. Faster expansion was recorded in cultural and leisure services, communications and information services, tourism‑related services, and transport and mobility services. The data indicates a gradual rebalancing toward services consumption, particularly experience‑ and information‑driven spending.

Nevertheless, despite the full‑year expansion, momentum weakened toward the end of 2025. In December, total retail sales grew 0.9 percent year‑on‑year and declined 0.12 percent month‑on‑month, suggesting continued caution among households amid a prolonged property downturn and uncertain income expectations.

Investment declined as the property sector drag persisted

Fixed asset investment declined 3.8 percent in 2025, marking the first full‑year contraction since consistent data became available. The downturn was driven overwhelmingly by the real estate sector, where investment fell by more than 17 percent, reflecting ongoing deleveraging, weak property sales, and continued caution among developers.

Excluding real estate, investment activity was broadly stable. Manufacturing investment recorded modest growth of 0.6 percent, while selected high‑technology segments saw significantly stronger expansion. Investment in information services increased by 28.4 percent, while aerospace and equipment manufacturing rose by 16.9 percent, highlighting continued capital flows into policy‑supported and innovation‑led industries.

From an investor perspective, the data suggest that China’s investment slowdown in 2025 reflected reallocation rather than retrenchment. Capital formation shifted away from property and toward industrial upgrading, advanced manufacturing, and productivity‑enhancing sectors, reinforcing the structural transition shaping China’s medium‑term growth model.

Foreign trade remained a key stabilizing factor

China’s external sector continued to act as an important buffer against domestic weakness. Total goods trade reached RMB 45.4687 trillion (US$6.36 trillion), up 3.8 percent year‑on‑year, with exports at RMB 26.9892 trillion (US$3.77 trillion, +6.1%) and imports at RMB 18.4795 trillion (US$2.58 trillion, +0.5%), a composition that illustrates export‑led resilience alongside softer domestic absorption.

High‑technology products delivered outsized gains, with high‑tech exports rising 13.2 percent, reflecting China’s improving competitiveness in advanced manufacturing and green‑adjacent technologies. Meanwhile, trade with Belt and Road partner economies expanded 6.3 percent and accounted for 51.9 percent of total goods trade, further diversifying export destinations and reducing reliance on traditional markets.

Private‑sector participation increased meaningfully. Imports and exports by private enterprises grew 7.1 percent, lifting their share of total goods trade to 57.3 percent, up 1.8 percentage points from a year earlier. This shift highlights the rising role of market‑driven firms in sustaining China’s external engagement and in channeling demand from faster‑growing overseas markets.

Price levels and employment signaled macroeconomic stability

Inflationary pressures remained subdued in 2025. Consumer prices were essentially flat compared to the previous year, while producer prices remained in negative territory, albeit with some improvement toward year‑end. Core inflation rose modestly, indicating limited pricing power across much of the economy.

Employment conditions remained broadly stable. The nationwide surveyed urban unemployment rate averaged 5.2 percent for the year, while per capita disposable income increased by 5.0 percent in real terms. Income growth was stronger in rural areas than in urban regions, contributing to gradual convergence but not yet sufficient to drive a consumption‑led turnaround.

Low inflation and stable employment conditions suggest that policymakers retain room to deploy targeted fiscal and monetary measures in 2026, should domestic demand remain weak.