BEIJING (Reuters) – China’s economic growth slowed to a three-year low in the fourth quarter as domestic demand softened, and while the full-year pace hit Beijing’s target, trade tensions and structural imbalances pose significant risks to the outlook.
China’s economy grew 4.5% in the fourth quarter from a year earlier, data from the National Bureau of Statistics (NBS) showed on Monday, slowing from the third-quarter’s 4.8% pace as consumption and investment dragged.
Analysts polled by Reuters had forecast fourth-quarter gross domestic product (GDP) would expand 4.4% from a year earlier. Last quarter’s growth was the slowest in three years.
KEY POINTS
* 2025 GDP +5.0% (f’cast +4.9%, government target of around +5%)
* Q4 GDP +4.5% y/y (f’cast +4.4%, Q3 +4.8%)
* Q4 GDP +1.2% q/q (f’cast +1.0%, Q3 +1.1%)
* Dec industrial output +5.2% y/y (f’cast +5.0%, Nov +4.8%)
* Dec retail sales +0.9% y/y (f’cast +1.2%, Nov +1.3%)
* 2025 fixed asset investment -3.8% (f’cast -3.0%, Jan-Nov -3.3%)
* 2025 property investment -17.2% (Jan-Nov -15.9%)
* China’s population falls for fourth straight year
MARKET REACTION:
The benchmark Shanghai Composite Index climbed as much as 0.6% to recover from early weakness after the data releases.
COMMENTARY:
FREDERIC NEUMANN, CHIEF ASIA ECONOMIST AND CO-HEAD OF GLOBAL INVESTMENT RESEARCH FOR ASIA, HSBC, HONG KONG:
“Not a huge surprise, but I think the high-frequency data numbers on retail sales, which came in weak, and fixed asset investment, continue to highlight the ongoing challenges that the economy is facing.
“On the domestic side, we continue to see some headwinds. For 2026, a key question is whether China can reignite growth on the consumption and investment side. Our forecast is the economy will continue to slow this year: This year, growth will slow to 4.6%.”
KYLE RODDA, SENIOR MARKET ANALYST, CAPITAL.COM, MELBOURNE:
“The data came in as expected. I think it’s noteworthy how much credence the markets put in the numbers at the moment. I do wonder if the markets have lost almost all trust in the veracity of the figures. Intuitively, growth is weaker than the numbers convey. The economy remains plagued by sluggish domestic demand, albeit the worst appears to be behind it. All in all, the numbers don’t really reveal anything new.”
SHANE OLIVER, CHIEF ECONOMIST, AMP, SYDNEY:
“No great surprises there, as is often the case, but it does look to me like the momentum has slowed as we’ve come into the end of the year… and that’s consistent with the weakness in retail sales, which suggests the stimulus boost from subsidies is fading, and we’ve also got continued weakness in fixed asset investment, which is now negative.
“I suspect that Chinese authorities continue to do just enough to keep growth ticking over around or just below 5%. And my feeling for this year is the final outcome probably ends up being around 4.8% or something… I think any stimulus is going to be incremental. Any extra stimulus will be incremental in nature, as opposed to a big bang.”
SIM MOH SIONG, FX STRATEGIST, OCBC, SINGAPORE:
“The picture there hasn’t really changed all that much… what’s supporting the economy is the external sector, exports, and the exports are benefitting from an undervalued Chinese currency. That’s what the numbers are telling us as well, that domestic demand is still subdued, because of the sluggish property sector, but the exporters are doing well, and that continues to support the economy.
“There’s probably a need for more policy stimulus down the road, but I think the expectation there is still one of dribs and drabs rather than a bazooka.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
“China hit 5% growth, but it wasn’t broad-based. Exports and manufacturing did the heavy lifting, while property and parts of domestic demand stayed soft — so the ‘headline win’ hides uneven momentum. The Q4 slowdown is the tell… suggesting China enters 2026 with fading momentum, not a fresh upswing.
“2026 is shaping up as a ‘managed slowdown.’ Unless policy pivots more decisively towards households and consumption, growth is likely in the low-4s to mid-4s — more stability management than a clean return to a 5%+ path.”
BACKGROUND
* China’s economy showed remarkable resilience in 2025, helped by smaller-than-expected U.S. tariff hikes and exporters’ push to diversify away from the United States.
* But its reliance on external demand underlined vulnerabilities in the world’s second-largest economy. Policymakers have their work cut out as a prolonged property slump and persistent deflationary pressures heighten calls to address deep structural imbalances.
* China logged a record trade surplus of nearly $1.2 trillion in 2025, led by exports to non-U.S. markets. However, demand at home weakened since late last year as confidence remained low amid the protracted property crisis.
* Economic growth is likely to slow to 4.5% in 2026 and maintain the same pace in 2027, a Reuters poll shows, underscoring the stiff challenge facing Chinese policymakers as U.S. President Donald Trump shakes up the global economic order.
* The 2026 economic outlook is clouded by rising global trade protectionism and by Trump’s unpredictable trade and broader economic policies.
* A slowdown in economic growth is likely to pile pressure on Chinese authorities for more stimulus as they look to address structural vulnerabilities to underpin the country’s longer-term health.
By REUTERS
(Reporting by Reuters Asia bureaus; Compiled and edited by Subhranshu Sahu)
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