2025 marked the concluding year of the "14th Five-Year Plan." Facing external challenges such as weakening global economic growth momentum and profound adjustments in the international trade landscape, alongside domestic difficulties like insufficient demand, China's economy demonstrated strong resilience. Supported by the coordinated efforts of fiscal and monetary policies, it successfully achieved the growth target set at the beginning of the year during the "Two Sessions."
Preliminary calculations indicate that the Gross Domestic Product (GDP) surpassed the 140 trillion yuan threshold for the first time in 2025. Calculated at constant prices, it increased by 5.0% year-on-year, maintaining the same growth rate as the previous year. Quarterly analysis shows GDP growth of 5.4% in Q1, 5.2% in Q2, 4.8% in Q3, and 4.5% in Q4, characterizing an economic trend of "starting high and stabilizing later." This performance can be primarily attributed to three key factors.
First, industrial production saw improvements in both quality and efficiency. In 2025, the value-added of industrial enterprises above the designated size nationwide increased by 5.9% compared to the previous year. Industrial production generally maintained a steady and accelerating trend, with high-tech and equipment manufacturing continuing to lead growth. Most industries and products achieved growth, and corporate confidence showed marginal improvement. Specifically, capacity utilization remained stable with an upward trend. The capacity utilization rate for industrial enterprises above the designated size reached 74.4% for the year, with quarterly rates of 74.1%, 74.0%, 74.6%, and 74.9%, showing a clear recovery momentum. The "ballast" role of equipment manufacturing and high-tech manufacturing became more pronounced. Value-added in equipment manufacturing grew by 9.2%, and high-tech manufacturing grew by 9.4%, outpacing the average for industrial enterprises above the designated size by 3.3 and 3.5 percentage points, respectively. The processes of intelligent and green transformation in manufacturing continued. Production of 3D printing equipment, industrial robots, and new energy vehicles increased by 52.5%, 28.0%, and 25.1%, respectively. Manufacturing sentiment improved significantly. In December 2025, driven by strong performances in the Purchasing Managers' Index (PMI) for high-tech manufacturing (52.5%), equipment manufacturing (50.4%), and consumer goods industries (50.4%), China's Manufacturing PMI (50.1%) rose above the 50-point boom-bust line, ending an eight-month streak below 50%. It increased by 0.9 percentage points from the previous month, and the Production and Business Activity Expectations Index reached 55.5%, up 2.4 percentage points.
Second, multi-pronged consumption growth stabilized the overall economy. Supported by "policy support, structural upgrades, and new consumption models," consumption consolidated its pattern of moderate growth. In 2025, China's total retail sales of consumer goods increased by 3.7% compared to the previous year. Key characteristics included steady growth in goods consumption, with faster sales growth for products related to replacement schemes, notably furniture, home appliances, cultural and office supplies, and communication equipment from larger enterprises. Service consumption showed bright spots, with concentrated demand release during summer for tourism and leisure activities driving rapid growth. Retail sales for cultural, sports, leisure, tourism consulting and leasing, and transportation services grew quickly. New consumption models accelerated their development, with digital, green, and health consumption continuing to expand. Notable growth was seen in online retail sales of physical goods, retail sales of new energy passenger vehicles, and sports and entertainment goods. Inbound consumption continued to expand, as the "inbound flow" rapidly transformed into "consumption increments," aided by the ongoing effects of tax refund policies for overseas visitors.
Finally, export performance significantly exceeded expectations. Calculated in US dollars, China's exports grew by 6.6% year-on-year in December 2025, accelerating from the 5.9% growth in November. For the full year, exports grew by 5.5%, indicating that the actual impact of US tariff hikes was relatively limited. Key features and trends included consistently high export volumes. Since the beginning of 2025, monthly export values (except February) remained stable above $300 billion. With the progress and phased achievements in Sino-US "reciprocal tariff" negotiations, monthly exports in the second half (except October) almost all stayed above $320 billion, culminating in a record high of $357.78 billion at year-end. Exports to the US showed signs of阶段性稳定, with overall dependency decreasing. December exports to the US were $34.175 billion, similar to the $34.3 billion, $34.92 billion, and $33.79 billion figures from September, October, and November, suggesting stabilization after fluctuations in the first half following the trade agreement. The proportion of exports to the US to China's total exports dropped from around 20.7% during Trump's first term to 9.55%. Export growth was mainly driven by expansion into non-US markets. Comparisons show that exports to ASEAN, the EU, Latin America, and Africa maintained growth in 2025. The growth in exports to ASEAN and the EU alone could offset nearly 80% of the decline in exports to the US. China is now one of the top three trading partners for over 160 countries and regions globally and the largest trading partner for 68 countries involved in the Belt and Road Initiative. Medium and high-end manufacturing has become the mainstay of China's exports. In 2025, mechanical and electrical products accounted for over 60% of export value, serving as a reliable "ballast." High-tech products accounted for over a quarter. The stable growth of these increasingly dominant medium and high-end manufacturing exports is a key factor supporting rapid export growth.
It is noteworthy that, compared to the stability of consumption and the outperformance of exports, the contribution of investment was undoubtedly weaker. Looking at the overall performance of the "troika" driving the macroeconomy in 2025, the contribution rates of final consumption expenditure, gross capital formation, and net exports of goods and services to economic growth were 52.0%, 15.3%, and 32.7%, respectively. National fixed asset investment cumulatively declined by 3.8% in 2025. Among the three major components of fixed asset investment, the largest drag was undoubtedly real estate development investment, followed by infrastructure investment. Real estate development investment fell by 17.2% year-on-year, infrastructure investment declined by 2.2%, while manufacturing investment remained relatively stable, growing by 0.6%. Additionally, there are numerous other structural and deep-seated contradictions in the fixed asset investment sector that could hinder growth. By registration type, foreign-invested enterprises saw the largest decline. Investment by domestic enterprises fell by 3.8%, investment by Hong Kong, Macao, and Taiwan enterprises fell by 2.2%, and investment by foreign enterprises plummeted by 13.8%. Regionally, the decline was more pronounced in eastern China. Investment in the eastern region fell by 8.4%, the central region by 2.7%, and the western region by 1.3%. Comparing by enterprise nature, private investment declined significantly. State-owned investment saw a slight decrease of 2.5%, while private fixed asset investment fell by 6.4% year-on-year. There may be certain interconnections between these trends, with the decline in foreign investment potentially being a significant driving force. For instance, foreign investment is relatively concentrated in eastern China, which attracts foreign capital due to advantages like talent aggregation, well-developed digital infrastructure, and industrial clusters. A reduction in foreign investment directly impacts the investment scale in the east. Furthermore, private enterprises play a crucial role in the supply chains of foreign enterprises. Reduced foreign investment and orders lead to decreased order volumes for many upstream private enterprises, potentially even prompting component suppliers to relocate overseas, thereby affecting the investment willingness and scale of private enterprises domestically.
Deflationary pressures eased, and direct financing growth accelerated. Price resilience strengthened throughout the year, with overall price movements aligning with macro-control expectations. In 2025, China's price levels operated steadily overall. The Consumer Price Index (CPI) accumulated average was flat compared to the previous year, and the year-on-year decline in the Producer Price Index (PPI) narrowed significantly, demonstrating strong resilience in a complex domestic and international economic environment and showing the continued effects of policy adjustments. Stable CPI operation ensured the stability of residents' lives, while the gradual recovery of PPI reflected the revitalization of the industrial economy. Although some areas were still affected by factors like fluctuations in international commodity prices and capacity adjustments in certain domestic industries, positive factors in price operations accumulated under the influence of policies aimed at expanding domestic demand, stabilizing growth, and adjusting structure, providing strong support for economic stabilization and recovery. December price data continued the recovery trend. The year-on-year CPI increase rose to its highest level since March 2023, and the PPI increased month-on-month for the third consecutive month, with its year-on-year decline narrowing further, reflecting the positive effects of domestic demand expansion policies, recovering consumer demand, and improving supply-demand structures in the industrial sector. Regarding CPI performance, the month-on-month change turned from negative to positive, and the year-on-year increase steadily expanded. The CPI rose 0.2% month-on-month in December, reversing the 0.1% decline from November; it rose 0.8% year-on-year, an increase of 0.1 percentage points from the previous month. This change was mainly supported by two factors: price increases in industrial consumer goods excluding energy, driven by policies to expand domestic demand and promote consumption, and increased demand ahead of the New Year, with prices for communication tools, maternal and child products, and recreational durable goods rising between 1.4% and 3.0%. Rising international gold prices led to a significant 5.6% increase in domestic gold jewelry prices, collectively pushing industrial consumer goods prices up 0.6%, contributing about 0.16 percentage points to the month-on-month CPI increase. Seasonal increases in food prices also played a role, with rising demand for fresh fruit and shrimp/crab before the holiday leading to price increases of 2.6% and 2.5%, respectively. Ample pig supply caused pork prices to fall 1.7%. Fresh vegetable prices rose 0.8%, influenced by favorable weather, but were 3.3 percentage points below the seasonal average. Overall food prices rose 0.3% month-on-month, providing mild support. The core CPI, excluding food and energy, rose 1.2% year-on-year in December, staying above 1% for the fourth consecutive month, reflecting a steady recovery in demand for resident service consumption and quality consumption. Service prices rose 0.6% year-on-year, with household service prices up 1.2%, highlighting demand vitality in sectors like domestic services. Although rent prices still fell 0.3%, the decline showed a narrowing trend, potentially stabilizing further with improvements in the job market and optimized population mobility. PPI's month-on-month increase expanded, and its year-on-year decline narrowed, indicating accumulating positive signals in the industrial sector. The PPI rose 0.2% month-on-month in December, expanding by 0.1 percentage points from November, marking three consecutive months of increase; it fell 1.9% year-on-year, with the decline narrowing by 0.3 percentage points, showing continued improvement in the supply-demand relationship for industrial products. Specifically, improved supply-demand structure was the core driver, with ongoing effects from capacity governance in key industries and comprehensive rectification of market competition order. Prices for coal mining and washing, and coal processing rose for the fifth consecutive month, up 1.3% and 0.8% month-on-month in December, respectively. Prices for lithium-ion battery manufacturing and cement manufacturing rose for the third month, and new energy vehicle manufacturing prices turned from decline to increase, reflecting the effectiveness of capacity optimization in advantageous industrial sectors. Input factors had a differentiated impact on PPI. Rising international non-ferrous metal prices drove domestic prices for non-ferrous metal mining and processing, and smelting and pressing, up 3.7% and 2.8% month-on-month, respectively, with significant increases in silver and gold smelting prices. Declining international crude oil prices led to domestic oil extraction and refined petroleum product manufacturing prices falling 2.3% and 0.9% month-on-month, respectively, demonstrating the complex impact of external market fluctuations on domestic industrial prices. Additionally, the cultivation and expansion of new quality productive forces drove price increases in related industries, with notable price rises in emerging sectors like external storage devices and components, and biomass liquid fuels, becoming new growth points in industrial price operations.
The capital market's ability to support real economic development continued to improve. China's capital market was relatively active overall in 2025, becoming an important channel for transforming deposits into real economic investment. Its indirect pulling effect on economic growth also increased, partially offsetting the negative impact of insufficient credit demand on real economic growth. Corporate financing costs in the capital market decreased significantly. Annual direct financing increased by 16.7 trillion yuan, 3.2 trillion yuan more than the previous year, and its share in the increment of aggregate financing to the real economy (AFRE) rose to 46.9%, an increase of 5.1 percentage points from the end of 2024. Credit growth slowed, but AFRE maintained relatively rapid growth. New credit for the year was 16.3 trillion yuan, 1.8 trillion yuan less than the previous year, showing clear structural characteristics. Household credit increment was limited, at only 441.7 billion yuan, while corporate credit, especially short-term credit, increased significantly. New AFRE for the year was 35.6 trillion yuan, 3.3 trillion yuan more than the previous year. Government bond financing was a major contributor, with an increment of 13.8 trillion yuan, 2.5 trillion yuan more than the previous year, indicating accelerated efforts from more proactive fiscal policy. Corporate direct financing increased by 2.87 trillion yuan, a significant rise of 666.8 billion yuan. Off-balance-sheet financing from banks increased by nearly 500 billion yuan, with trust loans increasing by 368.2 billion yuan. RMB loans under the AFRE caliber increased by 15.9 trillion yuan, 1.1 trillion yuan less than the previous year. At the end of 2025, the year-on-year growth of M2 rose to 8.5%, up 1.2 percentage points from the end of 2024; M1 growth rose to 3.8%, also up 1.2 percentage points. The M2-M1 growth spread narrowed from 6.1 percentage points at the end of 2024 to 4.7 percentage points, reflecting some improvement in the activation of funds and corporate operating expectations, though the economy's endogenous growth momentum still needs consolidation.
Setting the 2026 GDP Growth Target. The Central Economic Work Conference pointed out that China's economic development still faces many old problems and new challenges, including "deepening impacts from changes in the external environment, prominent contradictions between strong supply and weak demand domestically, and numerous risk hazards in key areas." However, it also emphasized that "most of these are issues encountered during development and transition, which can be resolved through effort. The supporting conditions and basic trend of long-term improvement in China's economy have not changed." For 2026, the focus will be on stabilizing employment, enterprises, markets, and expectations, and "promoting effective qualitative improvement and reasonable quantitative growth in the economy." Regarding effective qualitative improvement, the work priorities for 2026 may include, but are not limited to: enhancing the foresight, coordination, and effectiveness of macro policies, continuously optimizing governance efficiency; strengthening financial guarantees for major national strategies, channeling more capital and resources into "investing in people"; deepening the development of a unified national market, unleashing the advantages and potential of the ultra-large market; further improving the investment structure, significantly activating private investment; promoting the implementation of a new round of high-quality development actions for key industrial chains, expanding the application of "AI+" across various economic and social sectors; further enhancing the resilience and security of industrial and supply chains, continuously strengthening technological self-reliance and controllability; and orderly expanding independent opening-up in the service sector, creating diverse forms of open highlands. For reasonable quantitative growth, we believe it should be maintained at around 5% in 2026. Firstly, setting a 5% target is necessary. In the long term, the periods of the "15th Five-Year Plan" and "16th Five-Year Plan" are crucial for achieving the 2035 vision, such as reaching the level of moderately developed countries and doubling per capita GDP. Considering the total population is expected to decrease by an average of about 0.20% annually until 2035, GDP needs to grow at an average annual rate of 4.17% during the "15th Five-Year" and "16th Five-Year" periods. However, according to economic operation patterns, long-term economic growth often exhibits a "convergence" characteristic, meaning the average growth rate during the "15th Five-Year" period should be higher than that of the "16th Five-Year" period. As the inaugural year of the "15th Five-Year Plan," 2026 reasonably should maintain a faster growth rate compared to the following four years. Secondly, there is a solid internal foundation for achieving the 5% target. Based on the actual growth rates of the past three years and the effects of macro policies, there is a good foundation for maintaining this growth rate in 2026 (GDP growth was 5.2% in 2023, 5% in 2024, and 5% in 2025). Finally, suitable internal and external conditions exist for achieving the 5% target. In terms of growth momentum, compared to 2025, against the backdrop of easing Sino-US relations and an improving foreign trade environment, and with the implementation of more policies to promote consumption and expand effective investment, China's economic growth in 2026 is expected to be more stable and faster, with relatively more balanced growth drivers. It is projected that consumption's contribution to annual economic growth could remain around 55%, ultimately driving GDP growth by about 2.75 percentage points. The contribution of fixed asset investment (excluding rural households) to economic growth is expected to rebound to 25%, driving GDP growth by 1.25 percentage points. Net exports are expected to contribute 20% to annual economic growth, driving GDP growth by 1 percentage point.
Policy Recommendations. In 2026, China's economy will continue its recovery, achieving progress and improvement amidst stability. However, objectively speaking, external uncertainties should not be underestimated, the foundation for economic recovery is not yet solid, and issues such as unstable expectations, insufficient confidence, and weak demand persist, especially at the micro level. To further promote economic growth, it is essential to intensify the adjustment of macro policies and enhance their targeting and coordination. The following policy recommendations are proposed: Continuously strengthen real estate market regulation. Reduce the cost of first-time home purchases for residents and lower purchase thresholds. Coordinate with central bank monetary policy to synchronously reduce commercial bank mortgage rates or housing provident fund loan rates by 0.25–0.5 percentage points. Increase fiscal and tax support for home purchases, continuing to lower major transaction taxes (including deed tax, stamp duty) for first-home purchases; for secondary market transactions, reduce value-added tax and income tax rates, and shorten exemption periods. Introduce a fiscal interest subsidy loan policy with a term of one year and a subsidy幅度 of around 1 percentage point. Innovate by establishing a real estate transaction tax rebate system and, for periods within one year, set up tax deduction policies linked to durable consumer goods purchases like home renovation, to help release housing demand. On the supply side, encourage the development of "good housing" projects, improve standards for green buildings and smart homes, enhance housing quality, and activate the upgrade market. Real estate sector regulation should focus on preventing and resolving financial risks among developers. Accelerate the comprehensive coverage of commercial banks' "white list" special loans for developers, further promote the landing of special loan funds, and provide liquidity support to maintain normal operations for developers. If necessary, consider establishing new financial institutions specifically responsible for handling developers' existing loans to prevent risk generation and its spread within the financial system. Implement key measures from the new capital market "National Nine Articles" and promote the high-quality development of the REITs market. Support pilot projects for infrastructure REITs in the commercial real estate sector, revitalize developers' existing assets, accelerate the repair of developers' balance sheets, create cash flow and asset value by improving operational efficiency, mitigate developers' liquidity risks, and speed up the construction of a new model for real estate development. Enhance fiscal and credit support for service consumption. Currently, general personal consumption loan quotas in China range from 200,000 to 1 million yuan, with interest rates generally between 2% and 3%, and repayment periods as short as under one year to no more than three years. To accelerate the development of service consumption, it is recommended to moderately expand the scale of resident service consumption loans, lower service consumption loan interest rates, and extend repayment periods to stimulate resident consumption expenditure. Expand the coverage and precision of service consumption interest subsidy policies. Based on existing personal consumption loan subsidies, include livelihood-oriented services like elderly care, childcare, domestic services, rehabilitation healthcare, and vocational education in the key support list, and implement differentiated subsidy ratios for low-income groups and new urban residents. Establish a "Special Fund for Enhancing High-Quality Service Supply Capacity," jointly funded by central and local governments, to provide 30%–50% subsidies to small and micro service entities in sectors like catering, culture and tourism, and health for digital transformation, employee training, and green certification, alleviating their financing constraints. Innovate with a "fiscal + insurance + credit" risk-sharing model, encouraging local governments to partner with policy guarantee institutions to provide risk compensation for credit loans issued by banks to the service industry, reducing lenders' concerns. Create linkages between public services and consumption incentives. For example, users of government-certified inclusive childcare or community elderly care institutions could use service vouchers to claim consumption vouchers or special additional individual income tax deductions, forming a virtuous cycle of "government guidance—enterprise quality improvement—resident benefit." Through systematic institutional design, transform short-term consumption promotion into a long-term mechanism for improving service supply quality and releasing domestic demand potential. Pay attention to and actively address local fiscal difficulties. Given the difficulty in sustaining land finance, effectively implementing various existing and new policies first requires focusing on resolving local fiscal challenges. First, steadily advance debt resolution work. Building on the original "6+4+2" debt resolution plan, for the remaining 2.43 trillion yuan of implicit debt not yet addressed, the central government could issue special bonds and use transfer payments, supporting local governments through interest-free loans from the central government to clear the remaining implicit debt in one go, with the central government bearing the interest on the special bonds (the actual issuance amount might be lower than 2.43 trillion yuan as some local governments may have repaid part of the implicit debt; if the central government bears all principal and interest, local motivation for debt resolution might decrease significantly). This could significantly reduce local debt burdens and administrative pressure, allowing them to implement various domestic demand expansion policies without worries. Second, substantially increase the quota for local government special bonds, suggesting it could be raised to over 5 trillion yuan in 2026, covering the 800 billion yuan in local government special bonds used for debt resolution (the "2" in the "6+4+2" plan). Third, increase the scale of central government transfer payments to local governments to over 12 trillion yuan, an increase of about 1.7 trillion yuan from 2025, particularly increasing the budget for transfer payments related to shared fiscal responsibilities to alleviate the imbalance between local fiscal power and administrative responsibilities. Fourth, accelerate the reform of the tax system. Adjust the allocation of some consumption taxes to local finances, integrate local surcharges for unified collection to improve efficiency, simplify the tax system, and pilot authorizing slight adjustments to tax rates to enhance local tax adjustment capabilities. Continue encouraging local governments to actively revitalize existing assets to increase fiscal revenue, accelerate industrial transformation and upgrading to expand the tax base, and actively promote industrial and fiscal assistance between eastern, central, and western provinces. Better leverage the role of major economic provinces as "pillars." Optimize the assessment and evaluation system for major economic provinces, adding indicators like "Assessment of Major Strategic Tasks" or "Contribution to National Coordination," covering dimensions such as industrial chain driving effects, livelihood assistance, and ecological保障. For major economic provinces that achieve significant results in implementing national major strategies, give appropriate priority in central budget内 investment, focusing on supporting preliminary expenses for cross-regional major projects they lead, reducing pressure on local matching funds. Establish a "policy pilot priority" mechanism, allowing major economic provinces to conduct pilot reforms in areas like market-based allocation of factors (e.g., cross-provincial land quota trading, cross-border RMB settlement), cross-border data flow (e.g., international data port construction, cross-border digital trade rule-making), and green finance innovation (e.g., carbon account interoperability, mutual recognition of carbon financial products). Pilot schemes can be implemented after filing with the central government, with the central finance providing certain subsidies for reform costs during the pilot period and offering additional rewards for breakthrough achievements. Incentivize major economic provinces to proactively辐射 production capacity, technology, and management experience. Pilot a "Cross-Provincial Joint Project GDP Sharing System" first in the Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and Beijing-Tianjin-Hebei region. For jointly built industrial parks, co-invested major infrastructure, or industrial chain collaboration projects, have national statistical departments lead the establishment of unified sharing accounting standards and data sharing platforms, allowing reasonable splitting of GDP contributions between regions based on investment比例, employment contribution, or value-added source, while synchronously adjusting supporting policies like tax revenue sharing and energy consumption indicator allocation. This would effectively resolve the矛盾 of major economic provinces bearing "heavy burdens with weak motivation" and making "large contributions with small returns," forming a virtuous cycle of "proactive action—national benefit."
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