Economic growth eases in the fourth quarter of 2025

GDP reading: China's GDP grew 4.5% on a year-on-year basis in Q4, following a 4.8% expansion in the previous quarter. Q4's reading was the weakest since Q4 2022. The deceleration was mainly caused by the fading effect of a government program meant to stimulate goods spending, a weakening real estate market, and Beijing’s efforts to curb excess capacity and cut-throat price competition. In addition, export growth cooled in the fourth quarter compared with the third, as plunging shipments to the U.S. partly offset booming sales to other markets.

Broad-based slowdown: Compared with the prior period's data, readings in Q4 softened for the services sector (+5.2% on a year-on-year basis vs +5.4% in Q3) and the industrial sector (+3.4% vs +4.2% in Q3). In contrast, the reading for the agricultural sector improved in Q4 (+4.2% vs +4.0% in Q3). In seasonally adjusted quarter-on-quarter terms, economic output grew 1.2% in Q4, following a 1.1% expansion in the previous quarter.

Panelist insight: On the data and outlook, Nomura analysts said: “For the whole year, Beijing exactly reached its 5.0% growth target. However, the quarterly data clearly show a worsening picture in H2, in line with our demand cliff call made in mid-2025. Even though the deeply negative headline investment growth data might be partially due to some over-reporting in 2024 and underreporting in 2025, we still believe decline in investment was driven by the downward spiral of the property sector, the fiscal challenges of local governments and Beijing’s anti-involution campaign. The sharp slowdown of retail sales growth could continue in coming months, and it appears the worst is yet to come, as evidenced by the -32.0% y-o-y collapse of passenger car sales on 1-11 January.” United Overseas Bank’s Ho Woei Chen sounded more upbeat: “With continued support for domestic consumption and government investment, we see China’s growth remaining positive albeit slowing moderately to 4.7% in 2026. The impact of US tariffs and the higher base for exports will become more evident but tailwinds from global technology demand may provide some upside. The National People's Congress (NPC) starting on 5 Mar will set the growth target for 2026 where the current expectation is for officials to repeat the around 5% target.”

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