China’s economy grows 5% in 2025 as export engine offsets weak demand

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China’s economy expanded at a 5% annual pace in 2025, China’s government said Monday, with exports providing the main support even as the United States increased tariffs under President Donald Trump. Growth then slowed in the final quarter to a 4.5% annual pace, the government said—its weakest quarterly expansion since late 2022, when China began loosening strict COVID-19 pandemic rules.

The government said the full-year 2025 figure matched its official target of “around 5%.” In quarterly terms, it said the economy grew 1.2% in October to December. China’s leaders have been trying to accelerate growth after a slump in the property market and pandemic-related disruptions affected broader activity.

Exports helped offset softer domestic demand, with China’s government citing weak consumer spending and business investment as part of the picture. The strength of trade contributed to what the report described as a record trade surplus of $1.2 trillion.

The tariff pressure has also shifted trade flows, with China’s exports to the U.S. declining after Trump returned to office early last year and started raising tariffs. The government and the report said that decline was partially offset by shipments to other markets, even as some countries took action to protect local industries by raising import duties.

The report said Trump and Chinese President Xi Jinping agreed to extend a truce in their tariff dispute, easing some pressure on exports. Still, it said China’s exports to the U.S. fell 20% last year, underscoring the durability of the tariff impact on China’s largest bilateral export market.

Economists and strategists cited in the report said a key question for 2026 is whether external demand can keep carrying China’s growth. Lynn Song, chief economist for Greater China at Dutch bank ING, wrote in a note that “The key question is how long this engine of growth can remain the primary driver,” adding that additional economies could ramp up tariffs on China, tightening the squeeze. Deutsche Bank forecasts in the report pointed to slower growth ahead, estimating China’s economy would grow about 4.5% in 2026.

China’s policy focus, the report said, has repeatedly emphasized boosting domestic demand. But it said the effects have so far been limited, including in a trade-in program for drivers to replace older cars with more energy-efficient models, which it said has been losing momentum. China also has trade-in subsidies for appliances such as refrigerators, washing machines and TVs, and while major consumer stimulus policies in 2025 were set to continue into 2026, the report said they may be scaled back.

The report also linked the domestic-demand challenge to the property sector and consumer confidence. Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management, said in the report that “Stabilization, not necessarily recovery, of the domestic property market is key to revive public confidence and, hence household consumption and private investment growth.” The report said that approach is intended to support both consumption and investment.

Even with policy efforts, the report described pressure on businesses and households. It quoted Liu Fengyun, a 53-year-old noodle restaurant owner in a county in southwestern China’s Guizhou province, saying “People all say, ‘The overall environment is not good right now — what more can you expect? People don’t have money anymore. Nothing is easy to do now,’” adding that some customers told her that making breakfast at home is cheaper.

At the same time, China’s economic officials told reporters they see resilience. Kang Yi, head of China’s National Bureau of Statistics, told reporters that China’s economy sustained “steady progress in 2025 despite multiple pressures” and has “solid foundations” in countering risks, according to the report. The story also noted that some economists and analysts believe official data may overstate growth, with the Rhodium Group projecting a slower expansion of only 2.5% to 3% in 2025.

The report said China’s leaders view a strong and stable economy as important to social stability, and it quoted Neil Thomas, a fellow at the Asia Society Policy Institute’s Center for China Analysis, saying that Beijing “wants the economy to keep growing.” Thomas said China likely needs a roughly 4%-5% annual expansion to reach a softer target by 2035 of $20,000 GDP per capita.