China’s economy hit growth goal last year despite Trump trade war and property crisis | China

Chinese officials may say they met their growth targets last year, but Donald Trump’s continued trade aggression, the slow-motion collapse of the housing market and unhappy consumers remain major challenges for the world’s second-largest economy.

Data released on Monday showed that China’s economy grew steadily by 5% in 2025 compared to the previous year, meeting the official target of “approximately” that pace.

Experts expected punitive US tariffs to deal a major blow to China’s economic performance in 2025. Instead, the country defied expectations by recording its largest trade surplus ever ($1.2 trillion) as it found alternative markets for its products and American tariffs were less punitive than initially threatened.

Luke Yeaman, chief economist at the Commonwealth Bank of Australia, said navigating a worrying geopolitical environment remained a “major wildcard” but China’s economy should continue to grow until 2026.

Yeaman also warned that “the structural challenges plaguing China’s domestic economy will not go away.”

These include a four-year housing market crash that has left Chinese homeowners depressed and reluctant to spend.

Home prices have fallen more than 20 percent since their peak in 2021; In addition to the blow to consumer confidence, this also brought about a looming debt crisis in the real estate sector, casting a shadow over the country’s economic prospects.

While much of the developed world struggles to control inflation, China has been struggling with deflation in recent years; consumer prices rise only 0.8% in 2025.

Yeaman said Japan set a dismal precedent in the 1990s and early 2000s. “Even without a banking crash, property bankruptcies could depress growth for years,” he said.

Kang Yi, head of China’s National Bureau of Statistics, said on Monday that the world’s second-largest economy will “maintain its steady, solid growth momentum this year” despite “facing problems and challenges.”

But the latest figures masked a slowdown in late 2025; Production in the December quarter was only 4.5% higher than a year ago; this was the weakest level since late 2022.

Citi analysts describe a “K-shaped” economy with contrasting fortunes, with retail sales disappointing in December while exports and manufacturing climbed again, supporting overall growth.

Complicating the picture further is the fact that experts have long warned that official statistics are unreliable, with Capital Economics estimating that the latest growth figures could be inflated by as much as 1.5 percent.

China’s leaders have vowed to “significantly” increase household consumption’s share of the economy over the next five years. Household spending accounts for less than 40% of annual economic output; This is unusual for a country with China’s income level and is contrary to the global average of 60%.

As part of efforts to stimulate the economy, the Chinese government last year provided 300 billion yuan (US$43 billion) in subsidies to households that replaced old devices with new ones.

While that plan will be extended into this year, Moody’s Analytics analysts said the start of 2026 “brings a sense of deja vu to China’s economic discussions.”

“Once again, officials are promising stronger support to boost confidence and stabilize growth. And once again, households and businesses are wondering whether action will match that rhetoric.”