China Q4 growth slows to 4.5% meets target
China’s National Bureau of Statistics reported a year‑on‑year increase of 4.5% in the fourth quarter of 2025, a modest slowdown from the 4.8% pace recorded three months earlier and the slowest quarterly expansion in three years.
Quarterly Deceleration Raises Questions About Momentum
The latest figures show the country’s economy added roughly the same amount of output as a year ago, but the narrowing gap hints at fading momentum. Analysts note that the quarter’s industrial output rose 5.2% in December, driven by electric vehicles, shipbuilding and green‑energy technology, yet overall activity is not keeping pace with earlier quarters.
Official data also indicate a record trade surplus of $1.2 trillion, a 20% jump from the previous year. While the surplus shows the strength of export‑oriented sectors, critics argue the numbers may mask underlying weaknesses.
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Export Engine Offsets Domestic Slump
High‑tech manufacturing and overseas sales have surged, with firms diversifying into Asian, African and Latin American markets despite renewed U.S. tariffs. The export boom helped the country meet its full‑year target of 5.0% growth, a figure the government described as “around 5%.”
At the same time, domestic demand remains subdued. Property investment fell 17.2% over the year and home‑price declines continue to erode household wealth. Retail sales barely rose 0.9% in December, even though the government extended “trade‑in” subsidies for appliances and vehicles.
“We think growth is weaker than official figures suggest,” said Zichun Huang, China economist at Capital Economics, adding that the official numbers “overstate the pace of economic expansion” by at least 1.5 percentage points.
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In the middle of the report, it is worth noting that a reliance on export‑driven growth can be precarious when global demand shifts. Overcapacity in manufacturing means firms often cut prices to maintain volume, which can erode profit margins and limit the sustainability of the current expansion model. A balanced approach that revitalizes consumer confidence could help smooth the “K‑shaped” divergence between booming high‑tech sectors and lagging domestic markets.
Canada’s recent move to lower electric‑vehicle tariffs from 100% to 6.1% and the EU’s price‑floor agreement with the country illustrate a broader effort to ease trade tensions that have lingered since 2024. Such steps may provide a modest boost to export volumes, but the long‑term outlook still depends on whether domestic consumption can regain traction.
