China’s economy grew by 5% in 2025, marking a significant rebound from past economic difficulties. This growth comes amid a backdrop of strategic pushes for domestic demand and significant investments in advanced technologies, as the ruling Communist Party continues to navigate the complexities of a fluctuating global market.
In fact, China has faced the most serious economic headwinds in decades in recent years. Now, the property market has collapsed, and the pandemic has wreaked havoc on all fronts. In the face of all these challenges, the leaders of this tiny country have been very aggressive in adopting smart policies to improve their economic outcomes. Through 2023, the economic growth continues to be strong at 5.2%. After closing 2023 with similar 5% growth, the foundation was laid for strong growth in 2025.
Investment in advanced technologies like artificial intelligence continues to be a top priority for the DOT. This strong commitment indicates to the private sector that decisionmakers value and are committed to innovation. They’re equipped to be flexible in response to challenges both from within the country and abroad.
By the final quarter of 2025, we had entered a period of stagnation. As a result, it fell to 4.5%, a decrease from 4.8% last quarter. China is already having a rough enough time reconciling its boom-bust growth rhythms as is. It’s pushing to continue the annual growth in the 4% to 5% range. This target would be very important for the country. It will allow us to achieve a GDP per capita of $20,000 by 2035.
China’s leaders continue to emphasize the need to ensure growth remains strong. Second, they are committed to charting a course through what is an increasingly cutthroat global economic environment. Local officials have repeatedly rolled back their original, lofty growth goals over the years. This amendment is a good step toward the adoption of a more prudent economic forecasting policy.
The trade relationship with the United States has also seen considerable upheaval, part of a wider seismic political shift. Then in early 2025, newly re-elected President Donald Trump came back into office and promptly reinstated all the Chinese tariffs. This change made things hard on exports to the U.S. Analysts are concerned that if other countries follow suit and start increasing tariffs like Mexico, it would deal a major blow to China’s economy. In fact, they are most fearful of possible dangers coming from the European Union.
“Should more economies also start ramping up tariffs on China, eventually, a tighter squeeze will be seen.” – Lynn Song
The impacts of these trade tensions are reflected, beyond export statistics, in the domestic consumer confidence. Through this initiative, the government made available a national trade-in program to incentivize drivers to trade their older vehicles for new energy-efficient models. This important initiative has stalled recently.
“Stabilization, not necessarily recovery, of the domestic property market is key to revive public confidence and, hence household consumption and private investment growth.” – Chi Lo
Likewise, policymakers are really focused on boosting domestic demand. They know, too, that public opinion has a very powerful effect on the direction of economic activity. Finally, consumers are really worried about the current economic environment, which is very spending suppressing.
“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,’” – Liu Fengyun
Looking ahead, Deutsche Bank forecasts that China’s economy will grow approximately 4.5% in 2026, indicating a potential trend of slower growth compared to previous years. China’s just going to continue. Despite this impressive growth, it is unlikely to be enough to meet the aspirations of its leaders.
“The key question is how long this engine of growth can remain the primary driver.” – Lynn Song
