cross-posted from: https://lemmy.sdf.org/post/50129229

China’s world-leading export surplus delivered headline growth in 2025, but slowing domestic demand, falling prices and doubts over data credibility point to an economy losing momentum beneath the surface.

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China says its economy grew by 5 percent in 2025, meeting Beijing’s official target as a world record trade surplus of US$ 1.19 trillion boosted economic growth. The trade surplus is 20 percent higher than in 2024, according to data reported by Reuters.

This surplus reflects China’s remarkable dominance as an exporter of manufactured goods. The trade surplus increase was driven by a rise in exports to Europe, Latin America and Southeast Asia, despite a 20 percent decline in exports to the US.

However, analysts have for long been sceptical regarding the economic growth figures provided by the Chinese government. Analysts have again questioned the veracity of the official economic data released by Beijing due to weak investment and consumer spending in China. Economists at Capital Economics in the UK aver that their own calculations suggest China’s official growth figures “overstate the pace of economic expansion” by at least 1.5 percent.

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Although China achieved its 5 percent growth target, Chinese government figures also showed economic growth slowed to 4.5 percent in the final quarter or Q4 of 2025, compared to growth in Q4 in 2024. Retail sales rose just 0.9 percent in December 2025, the slowest pace in three years, reflecting the negative consumer sentiment. China is facing stagnant prices with employers cutting wages because workers face a choice of accepting lower pay in a highly competitive job market. This is also contributing to lower consumption rates.

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For 2026 and beyond, China’s economy will slow down further. This lower growth will be accompanied by increasing resources provided by Beijing for technology-intensive growth sectors such as artificial intelligence, robotics, quantum computing and other sectors. These sectors are not labour intensive and have contributed to rising youth unemployment.

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There are multiple explanations for lower economic growth rates in China. First, exports cannot be relied upon as a source of economic growth in 2026 and beyond. Trump’s tariffs are a huge cause for concern […] It is also likely that most European countries will enhance their de-risking from China due to Beijing employing economic statecraft to achieve political goals, especially regarding Taiwan and the South China Sea. European countries are also increasingly wary of their economic reliance on China and Beijing’s interference in domestic affairs, particularly democratic and electoral processes. Rising global protectionism is also going to dampen exports in the future.

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Domestic consumption is also not expected to increase significantly to lead to higher economic growth despite repeated government attempts […] due to lack of faith in Chinese government policies and negative sentiment regarding the future of the economy, high youth unemployment at around 20 percent, lack of social safety nets such as unemployment allowances and free medical care, and demographic challenges due to lower birth rates and a declining population.

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The slump in the real estate sector has negatively affected construction activity, household wealth and local government finances. Millions of households have been left with unfinished homes or properties that have lost significant value, undermining confidence in what was once seen as the safest place to store savings. Falling land sales have squeezed local government revenues and increased local government debt.

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Beijing’s dilemma is that growth can be boosted through stimulus, but this will lead to rising debt. At the same time, China must reduce reliance on exports in an increasingly uncertain trade environment. Domestic demand is unlikely to rise significantly due to higher precautionary savings, weak confidence, absence of social safety nets, and demographic decline. These structural challenges are likely to result in lower growth rates in the years ahead.