China hits 5% growth target as exports offset weak domestic demand

BEIJING

China’s economy met its annual growth target of around 5% last year, buoyed by strong exports despite weak domestic demand, deflationary pressures and uncertainty fueled by US tariffs.

China’s gross domestic product grew 5% to 140.1 trillion yuan, or $20.1 trillion, for the first time, according to data released by the National Bureau of Statistics. The growth met Beijing’s target even as key economic indicators showed instability.

US President Donald Trump’s tariffs were expected to slow Chinese exports, but robust foreign trade helped offset sluggish consumption and domestic demand. While production expanded, falling producer prices, stagnant consumer prices and a prolonged downturn in the real estate sector weighed on growth.

China’s economy grew 2.2% in 2020, 8.4% in 2021, 3% in 2022, 5.2% in 2023 and 5% in 2024, official data showed.

Industrial production rose 5.9% last year, while services output increased 5.4% and retail sales gained 3.7%. At the same time, fixed-asset investment — including infrastructure, real estate, machinery and equipment — fell 3.8%. Industrial capacity utilization slipped to 74.9% at the end of 2025, down 1.3 percentage points from a year earlier.

The downturn in the real estate sector continued to deepen. Real estate investment fell 17.2% year over year in 2025, while new home prices dropped 12.6%. Property investment peaked at 14.7 trillion yuan, or $2.1 trillion, in 2021 before declining to 8.2 trillion yuan, or $1.1 trillion, in 2025.

Labor market pressures also persisted. China’s urban unemployment rate edged up 0.1 percentage point to 5.2% at the end of 2025. Youth unemployment remained elevated, with the jobless rate for those ages 16 to 24 at 15.7% and 16.5% in 2025, exceeding the overall unemployment rate.

Consumer prices remained flat last year, while producer prices continued to fall. The Consumer Price Index showed no annual increase in 2025 after rising 0.2% in 2024, remaining well below Beijing’s 2% inflation target. The Producer Price Index declined 3% in 2023, 2.2% in 2024 and 2.6% in 2025.

China has kept inflation below 1% since March 2023, prompting authorities to lower the annual inflation target from the traditional 3% to 2% for 2024. While many developed economies grappled with high inflation after the COVID-19 pandemic, China faced persistent deflationary pressure.

Exports proved to be a key driver of growth. Chinese exports rose 5.5% year over year to $3.77 trillion in 2025, while imports were flat at $2.58 trillion, according to the General Administration of Customs. The country’s trade surplus reached a record $1.19 trillion.

Trade with the US weakened amid tariff tensions, with Chinese exports to the US falling 20%. Exports to other regions, however, increased sharply, rising 13.4% to the Association of Southeast Asian Nations, 8.4% to the EU, 7.4% to Latin America and 25.8% to Africa.

Foreign investment flows remained under pressure. China received 693.1 billion yuan, or $98.4 billion, in foreign direct investment from January through November 2025, while foreign capital in use fell 7.5% year over year, according to the Commerce Ministry. FDIs declined 8% in 2023, the first drop since 1998, and fell a further 27.1% in 2024, the sharpest decline on record.

Analysts attributed the slowdown in foreign investment to rising geopolitical risks linked to US technology sanctions, Trump’s second-term protectionist policies, efforts by Western countries to reduce economic dependence on China, and ongoing shifts in global supply chains.