Despite facing a multitude of challenges, including the ongoing US-China trade tensions and a prolonged slump in the domestic property market, China’s economy managed to hit its growth target of around 5% last year. This resilience in the face of adversity has surprised many experts who had predicted a more significant economic downturn.
The data released on Monday showed that China’s economy grew by 5% in 2025, remaining steady compared to the previous year and meeting the government’s official target. This performance was particularly impressive given the punitive US tariffs that were expected to deliver a major blow to China’s economic performance.
However, the country managed to defy expectations by recording its largest-ever trade surplus of $1.2 trillion, as it found alternative markets for its products and the American tariffs proved less punitive than originally threatened. Luke Yeaman, the chief economist at the Commonwealth Bank of Australia, noted that navigating the fraught geopolitical landscape remained a “major wildcard,” but he believes China’s economy should continue to grow through 2026.
At the same time, Yeaman warned that the “structural challenges plaguing China’s domestic economy are not going away.” One of the most significant of these challenges is the four-year housing market meltdown, which has left Chinese homeowners depressed and unwilling to spend. Home prices have plunged by more than 20% since their peak in 2021, and this, combined with the blow to consumer confidence, has also left a looming debt crisis in the property sector that casts a pall over the country’s economic prospects.
Further complicating the picture is the fact that experts have long warned that official statistics in China are not entirely reliable, with Capital Economics estimating that the latest growth numbers could be inflated by as much as 1.5 percentage points.
Despite these challenges, the head of China’s National Bureau of Statistics, Kang Yi, stated that while the world’s second-largest economy “faces problems and challenges,” it would “maintain stable, sound growth momentum this year.” However, the latest figures did show a slowdown in late 2025, with output in the December quarter only 4.5% higher than a year earlier – the weakest since late 2022.
To boost the economy, the Chinese government has implemented various measures, including providing 300 billion yuan (US$43 billion) in subsidies to households that traded in old appliances for new ones. While this scheme will be extended into this year, Moody’s Analytics analysts said the start of 2026 “brings a sense of déjà vu to China’s economic debate,” as “once again, officials are promising stronger support to lift confidence and stabilise growth, and once again, households and businesses are wondering whether action will match the rhetoric.”