By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News. December 22, 2025. Article no 1948.

China’s economy is expected to expand at around 5% in 2025, roughly in line with the government’s official growth target, before moderating modestly in 2026. This trajectory reflects a resilient industrial and export sector alongside persistent weaknesses in domestic demand and real estate markets, as well as subdued price pressures.

Real GDP Growth in 2025

International institutions project China’s GDP to grow by about 5.0% in 2025, in line with Beijing’s “around 5 percent” target. The IMF’s 2025 Article IV staff projection puts growth at 5.0% for 2025 and 4.5% for 2026, reflecting modestly stronger activity supported by recent policy measures.

The World Bank also forecasts growth close to this level, estimating 4.9% for 2025 and a slight deceleration to 4.4% in 2026, under moderately accommodative fiscal and monetary conditions.

Growth Composition in 2025
In 2025, China’s growth is being supported more by industrial output, high-tech manufacturing, exports, and infrastructure investment, whereas household consumption and real estate remain weak. Weak consumer demand is a common theme in recent data, with retail sales expanding only modestly despite policy incentives.

Inflation and Price Dynamics
Price pressures remain subdued. Consumer price inflation is low, and analysts note continued concerns over deflation, particularly reflected in weak nominal GDP growth and a negative or very low GDP deflator. This dynamic highlights persistent demand shortfalls relative to productive capacity.

2025: Key Macro Indicators

Industrial Production
Industrial value-added is growing in mid-single digits year-on-year, with strength concentrated in equipment and high-technology manufacturing sectors. Export volumes, particularly in machinery and electronics, continue to support production.

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Retail Sales / Consumption
Retail sales growth remains positive but below GDP growth, indicating soft household spending. In November 2025, retail sales rose only about 1.3% year-on-year, well below pre-COVID trends, evidencing cautious consumer sentiment amid property stress and labor market uncertainty.

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Fixed Asset Investment
Aggregate investment growth is modest. Manufacturing and infrastructure projects are relatively stronger, but real estate investment continues to shrink, reflecting the ongoing adjustment in China’s property sector, which is a significant economic drag.

2026: Outlook and Projections

Real GDP Growth

IMF staff projects growth at approximately 4.5% in 2026, down from 5.0% in 2025.

World Bank forecasts about 4.4% for 2026.

Projections assume continued fiscal and monetary accommodation to mitigate external headwinds and domestic weakness, particularly in consumption and property investments.

Price Dynamics
Deflationary pressure is likely to persist into 2026. With weak demand and excess capacity, some indicators point to continued downward forces on the overall price level—especially in sectors exposed to oversupply.

Structural Themes Shaping the Medium Term

Demand Mix
Growth remains weighted toward external demand and investment rather than consumption. The rebalancing toward a consumption-led model continues to lag despite policy efforts aimed at stimulating household spending and reducing precautionary savings.

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Real Estate Drag
The protracted adjustment in China’s property sector continues to be a crucial headwind. The sector’s contribution to GDP has contracted from previous peaks, eroding local government revenue and dampening investment and consumer confidence.

China’s real estate market remains in a multi‑year downturn in 2025, and most mainstream forecasts expect prices and investment to stay weak through 2026, with only tentative signs of stabilization in top‑tier cities toward 2027. Policy support is sizeable but calibrated, so the sector is shifting from a growth engine to a smaller, more regulated and rental‑oriented component of the economy rather than “snapping back” to its old role.

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Demographics and Productivity
An aging population and slowing productivity gains are prominent structural constraints that are expected to dampen China’s medium-term potential growth beyond the immediate forecast horizon. These demographic factors weigh on labor force growth and aggregate demand.

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© Copyright 2025 – Eurasia Business News. Article no. 1948