In 2025, the economy accelerated structural optimization and transformation of growth drivers against a backdrop of strong supply and weak demand. Fourth-quarter GDP grew by 4.5%, bringing full-year growth to 5.0%, successfully meeting the annual target. Three distinct characteristics emerged: first, the "strong supply, weak demand" dynamic was pronounced, with persistent low inflation pressures; second, macroeconomic policy support intensified, but transmission efficiency and marginal effectiveness require improvement; third, the transition between old and new growth drivers accelerated, with significant structural optimization features.
GDP growth is projected at 4.9% for the first quarter of 2026 and approximately 4.8% for the full year. Over the medium to long term, despite the persistence of the "strong supply, weak demand" pattern, the accelerated transition between drivers, the increasing contribution from high-tech manufacturing and modern services, coupled with the 15th Five-Year Plan's goal of building a modern industrial system, will enhance endogenous growth resilience. In the short term, the waning momentum of domestic demand observed in late 2025 is expected to continue into early 2026. However, the Central Economic Work Conference has signaled proactive policy support, with intensified counter-cyclical adjustments set to underpin a marginal improvement in the first quarter. The full-year trajectory will hinge on the efficiency of policy implementation and the effectiveness of structural optimization.
Economic activity in December continued the trend of diverging supply and demand, with endogenous growth momentum remaining insufficient, displaying a structural pattern of "rebounding production and exports, alongside pressured consumption and investment." On the production side, industrial value-added and the services production index both improved, buoyed by recovering exports and new quality productive forces. On the demand side, retail sales grew by a mere 0.9%, hampered mainly by a high base, catering revenue, and consumption among middle-to-low-income groups. The cumulative decline in investment widened again, with manufacturing, infrastructure, and real estate investment growth all decelerating faster. Manufacturing investment grew only 0.6%, significantly dragged down by mid- and upstream sectors. Broadly-defined infrastructure investment turned negative, primarily due to local government debt resolution and a shortage of traditional infrastructure projects. The decline in real estate investment continued to widen, exhibiting bottom-seeking characteristics marked by "demand contraction, high inventory, falling prices, and tightening financing." Exports, supported by a complete industrial chain and technological upgrades, maintained strong resilience.
Inflation is expected to continue its recovery trend in 2026. Inflation weakened in 2025, with the GDP deflator falling by 1.0% year-on-year. However, signs of improvement emerged by year-end—the CPI rose for four consecutive months, and the PPI registered positive month-on-month growth for three months, primarily benefiting from a low base for food, trade-in policies, and anti-involution measures. Looking ahead to 2026, the low base effect and coordinated policy efforts will continue to support the inflation recovery. The full-year averages for CPI and PPI are projected to moderately rebound to 0.7% and 0.0%, respectively, with PPI likely turning positive around the second quarter. In terms of timing, influenced by the shifting Lunar New Year, CPI growth in January and February is forecast at approximately 0.2% and 1.1%, respectively.
Aggregate financing to the real economy (AFRE) growth continued to slow, but signs of improvement emerged in corporate credit. Financial data for 2025 was characterized by "aggregate expansion, front-loaded pace, but fiscal dependence and weak endogenous momentum." Government bonds accounted for 76% of the annual increase in AFRE, while the household sector's contribution to credit growth declined markedly (new household loans constituted only 2.7% of total new loans). In December, both AFRE and M1 growth continued to slow, but corporate sector credit showed signs of improvement. Looking forward, credit growth is expected to gradually stabilize, while AFRE still faces downward pressure. Monetary policy is anticipated to maintain an accommodative stance, but comprehensive RRR and interest rate cuts may await clearer signals.
The full-year economic performance in 2025 was in line with expectations, with the highlights primarily reflected in structural optimization, showing three distinct characteristics.
First, the "strong supply, weak demand" pattern was significant, with persistent low inflation pressure. Supply-side resilience was prominent: value-added of major industrial enterprises grew by 5.9%, and the services production index grew by 5.4%, both significantly higher than the 4.0% nominal GDP growth. Exports grew against the trend by 6.1%—a notable achievement under the triple pressures of US tariff hikes, slowing global demand, and a high base—serving as a key external demand driver supporting industrial capacity utilization. Meanwhile, the demand side remained under pressure: total retail sales of consumer goods grew by 3.7%, while fixed-asset investment fell by 3.8% year-on-year, with private investment declining even more sharply. Monetary data further confirmed insufficient demand: new household loans for the full year were 2.28 trillion yuan less than the previous year, and new medium- and long-term corporate loans were 1.26 trillion yuan less, reflecting weak confidence among micro entities and a reluctance to expand production or increase leverage. The supply-demand imbalance ultimately transmitted to prices: CPI was flat (+0.0%), PPI fell by 2.6%, and the GDP deflator declined by nearly 1.0%, highlighting that aggregate demand remains in a recovery phase and low inflation pressure has not been fundamentally alleviated.
Second, macroeconomic policy support intensified, but transmission efficiency and marginal effectiveness require improvement. Counter-cyclical adjustment strengthened significantly in 2025: net government bond financing increased by 2.54 trillion yuan year-on-year; the balances of M2 and AFRE grew by 8.5% and 8.3% year-on-year, accelerating by 1.2 and 0.3 percentage points from 2024, indicating coordinated fiscal and financial efforts and increased support for stabilizing growth. However, a phenomenon of "matching growth rates but weakening efficiency" emerged between policy input and output—although the real GDP growth rate remained flat at 5.0% compared to 2024, the nominal GDP created per unit of new AFRE dropped from 4.18 in 2024 to 3.94 in 2025. The support intensity of outstanding AFRE for nominal GDP (nominal GDP/outstanding AFRE) also slightly declined from 0.33 to 0.32. This suggests a slowdown in the velocity of money within the real economy, potential structural mismatches, or some funds flowing into less efficient areas. Under the constraint of insufficient demand, the quantitative expansion of policy has not yet been fully translated into qualitative improvement, indicating significant room for enhancing policy effectiveness.
Third, the transition between old and new growth drivers accelerated, with significant structural optimization features. From the production side, industrial upgrading accelerated. In the industrial sector, the growth rates of equipment manufacturing (9.2%) and high-tech manufacturing (9.4%) were significantly higher than the average for major industrial enterprises (5.9%), making them the core engines driving industrial growth. The internal structure of the services sector also continued to optimize, with modern services, represented by information transmission, software, and IT services (growth of 11.1%), far outpacing traditional sectors, highlighting the increasingly dominant role of knowledge-intensive services. From the demand side, the structure of investment and consumption also confirms the driver transition. Investment is accelerating towards innovative fields, with active investment in high-tech industries; investment in information services grew by a high 28.4%, accumulating new potential for future growth. The consumer market exhibited a pattern of "stable basic necessities, standout upgraded consumption," with retail sales of upgraded goods like communication equipment and cultural and office supplies achieving high growth rates exceeding 15%, indicating that domestic demand is upgrading towards higher quality and intelligence. Both the production and demand structures clearly indicate a systematic improvement in the endogenous momentum and structural quality of economic growth.
In December, the economy continued the trend of diverging supply and demand, with endogenous growth momentum remaining insufficient.
Production in 2025 exhibited distinct characteristics of "dual optimization in aggregate and structure, alongside intensified supply-demand contradictions." First, new growth drivers supported a slight increase in industrial production at a high level. Value-added of major industrial enterprises grew by 5.9% year-on-year for the full year, up 0.1 percentage points from the previous year. Equipment manufacturing and high-tech manufacturing grew 3.3 and 3.5 percentage points faster than all major industrial enterprises, respectively (primarily driven by转型升级需求和出口), with contribution rates reaching 54% and 26%, demonstrating significant support. Second, modern services helped improve service production. The value-added of the services sector grew by 5.4% year-on-year in 2025, up 0.3 percentage points from the previous year. Information transmission, software, and IT services, along with leasing and business services, grew by 11.1% and 10.3% respectively (mainly benefiting from the digital economy and "AI+"), significantly faster than the overall services sector and improving from the previous year, serving as key supporting forces. Third, the pressure from "strong supply, weak demand" intensified. This was reflected in industrial and services production growth rates significantly exceeding the growth rates of the two major domestic demand components—investment and consumption. The industrial capacity utilization rate hit a new historical low, indicating strengthened constraints from weak demand.
The production side in December continued the full-year pattern, with new drivers helping both industry and services improve. On one hand, the value-added of major industrial enterprises grew by 5.2% year-on-year, up 0.4 percentage points from November. High-tech manufacturing value-added, benefiting from industrial upgrading and export improvement, grew by 11%, a significant increase of 3.1 percentage points from the previous month, serving as the primary contributor. Meanwhile, production growth in upstream mining and automotive manufacturing declined noticeably, dragged down by anti-involution policies and weakening investment demand. On the other hand, the services production index grew by 5% year-on-year, up 0.8 percentage points from November. The production indices for information transmission, software, and IT services; leasing and business services; and finance increased by 1.9, 2.9, and 1.4 percentage points from the previous month, respectively, providing significant support, closely related to accelerated "AI+" deployment in various regions and a recovering financial market.
Looking ahead, supported by resilient exports, improving corporate profits, and industrial projects in the first year of the 15th Five-Year Plan, industrial production is expected to maintain a medium-to-high growth rate of around 5% in 2026. Simultaneously, benefiting from a robust digital economy and various policies promoting consumption and improving service supply, services production is also expected to remain resilient.
Consumption in 2025 remained generally stable, but evidence from three aspects indicates that its growth momentum still needs consolidation. First, the improvement in retail sales relied mainly on trade-in policies. Total retail sales of consumer goods grew by 3.7% year-on-year, up 0.2 percentage points from the previous year. Consumption related to trade-in policies contributed 0.6 percentage points to retail sales growth, an increase of 0.3 percentage points from the previous year, accounting for the entire increase in retail sales, while growth in other categories slowed. Second, service consumption growth slowed compared to the previous year. Service retail sales grew by 5.5% year-on-year, significantly higher than the growth of goods retail sales and total retail sales, but compared to its own 2024 growth rate, it actually slowed by 0.7 percentage points, indicating that the potential of service consumption still requires stronger policy activation. Third, both per capita household consumption expenditure growth and the propensity to consume declined. The growth rate of per capita household consumption expenditure fell by 0.9 percentage points to 4.4% in 2025, partly due to a 0.3 percentage point decline in per capita disposable income growth. The marginal propensity to consume also fell by 0.3 percentage points, constituting a significant drag.
Pressure from slowing consumption remained prominent in December. Retail sales grew by 0.9% year-on-year, down 0.4 percentage points from November, and fell by 0.12% month-on-month, negative for two consecutive months. Breaking down the structure, three main factors were the drag: First, catering revenue growth slowed significantly, declining by 1.0 percentage points from November despite a low base from the previous year, constituting a notable drag. Second, consumption among middle-to-low-income groups weakened. Affected by slowing growth in household income and the number of migrant workers in the fourth quarter, the growth of retail sales below the designated size (representing this group) slowed considerably, reducing its contribution to retail sales growth by 0.3 percentage points compared to November. Third, sales of designated-size goods excluding trade-in related categories declined more, pulled down by a high base from the same period last year, reducing their contribution by about 0.3 percentage points. In contrast, although growth rates for trade-in related categories mostly remained negative, their declines narrowed compared to November, and their contribution to retail sales actually increased. Meanwhile, the cumulative growth rate of service retail sales improved to 5.5%, up 0.1 percentage points from November, marking the fourth consecutive month of improvement.
Looking ahead to 2026, retail sales growth is expected to moderately rebound, supported by recovering prices boosting income and policies stimulating service consumption. However, the extent of recovery will still be constrained by factors like real estate adjustment, with full-year growth projected at around 4.5%.
Investment turned negative in 2025, becoming the main drag on domestic demand recovery. Full-year fixed-asset investment fell by 3.8% year-on-year, the first annual decline on record. By component, construction and installation engineering investment fell by 8.4%, the primary drag, while equipment and tool investment grew by 11.8%, still providing strong support. By category, growth rates for manufacturing, infrastructure, and real estate investment all declined. Real estate investment saw its decline widen to 17.2%, the main drag. Manufacturing investment grew by only 0.6%, the lowest rate except for the pandemic year, mainly due to weak demand expectations and insufficient willingness for capital expenditure under anti-involution policies. Broadly-defined infrastructure investment fell by 1.5%, a sharp deceleration of 10.7 percentage points from 2024, constrained mainly by local hidden debt resolution and a "funds waiting for projects" situation. Looking forward, driven by factors such as the "two major projects" list, the early allocation of central budget investment plans, fiscal carryover funds and quasi-fiscal tools, and the later Lunar New Year favoring a local government sprint at the start of the year, investment growth is expected to stabilize and stop declining in Q1 2026, with infrastructure investment being the main support.
Manufacturing investment, dragged down by mid- and upstream industries, saw its decline widen again. January-December manufacturing investment grew by 0.6% year-on-year, down 1.3 percentage points from the January-November period, indicating an acceleration in the downturn. The year-on-year decline in December reached 10.5%, widening by 6.1 percentage points from November, the first double-digit decline outside of pandemic months. By sector, except for computer and communication equipment, investment growth in other mid-stream equipment manufacturing sectors declined, with high corporate cost pressures, anti-involution policies, and corporate overseas expansion being potential core drags. The decline in investment in upstream nonferrous metal smelting and pressing widened, mainly affected by weak domestic investment demand, especially the ongoing real estate slump. For 2026, clearer export prospects, improving corporate profits, and industrial layout under the 15th Five-Year Plan will support a rebound in manufacturing investment. However, constraints from "anti-involution" policies, the ongoing real estate adjustment, and capital diversion from corporate overseas expansion will limit the rebound, with investment growth expected to only recover modestly.
Broadly-defined infrastructure investment turned negative, affected by local debt resolution and insufficient project reserves. January-December broadly-defined infrastructure investment fell by 1.5% year-on-year, while narrowly-defined infrastructure investment fell by 2.2%, down 1.6 and 1.1 percentage points from January-November, respectively. The main drags were likely funds being squeezed by local debt resolution and insufficient traditional infrastructure project reserves. Specifically, the decline in traditional infrastructure sectors widened further. Investment in transport, storage, and postal services, and water management, environment, and public facilities saw their declines widen by 1.1 and 2.1 percentage points, respectively. Investment related to new infrastructure remained resilient. Investment in production and supply of electricity, heat, gas, and water, although slowing, still achieved relatively high growth of 9.1%, providing important support for the green transition of the energy structure. Meanwhile, the decline in narrowly-defined infrastructure was smaller than in the aforementioned sectors, suggesting a possible recovery in new infrastructure investment represented by internet and related services. For 2026, supported by optimized special bond allocations, continued efforts from new政策性金融工具, and the launch of major 15th Five-Year Plan projects, infrastructure investment is expected to moderately rebound. Structurally, traditional "hard infrastructure" and livelihood-oriented "soft infrastructure" will be emphasized equally, but short-term pressures from clearing overdue payments to enterprises need monitoring.
The decline in real estate investment continued to widen, still oscillating while seeking a bottom. January-December real estate investment fell by 17.2% year-on-year, with the decline widening by 1.3 percentage points from January-November, showing a volatile downward trend. First, household home purchase demand continued to contract. January-December commercial housing sales area fell by 8.7%, and sales value fell by 12.6%, with declines widening by 0.9 and 1.5 percentage points from the previous month, respectively. Second, real estate inventory destocking pressure remained high. Although the growth rate of floor space of commercial housing awaiting sale slightly declined, the inventory-to-sales ratio remained at 10.2 months, unchanged from the previous month and at a historical high due to persistently sluggish sales. Third, housing prices continued to fall. The monthly环比 for new commercial residential prices in 70 large and medium-sized cities fell by 0.4% in December, with the year-on-year decline widening by 0.2 percentage points. Fourth, leading indicators remained weak. The year-on-year decline in sources of funds for real estate development widened by 1.5 percentage points to -13.4% for January-December. The year-on-year decline in land transaction area (TTM) in 100 major cities widened by 1.3 percentage points to -9.7% in December, indicating no signs of stabilization in financing, land acquisition, or sales for developers, suggesting real estate investment is still bottom-seeking and requires further policy support for market stabilization.
Exports grew by 5.5% in 2025, achieving high growth on top of last year's high base. Resilience stemmed from three main sources: first, significant supply-side advantages, with value-added of equipment manufacturing and high-tech manufacturing growing by 9.2% and 9.4% respectively, forming a core competitive edge through complete industrial chains and technological upgrades; second, prominent price competitiveness, as the domestic low inflation environment (flat CPI, PPI down 2.6%) made Chinese products more cost-competitive overseas; third, market diversification and product structure optimization, with the share of exports to emerging markets like the Belt and Road Initiative increasing, and strong export momentum for high-tech products like new energy vehicles and industrial robots, effectively offsetting pressure from US tariff hikes.
Looking ahead to 2026, China's exports will face constraints from a high base, slowing global trade, weak European demand, and potential trade frictions. However, the global interest rate cutting cycle is expected to mildly boost external demand. Meanwhile, China's competitiveness in new quality productive forces like AI continues to strengthen, the export structure is upgrading towards higher technology and value-added, and companies are accelerating overseas expansion and deepening cooperation with non-US markets like ASEAN and Africa, providing structural support. Full-year growth is projected at around 3-5%.
Export growth continued to rebound in December, primarily driven by an increase in export volume. Overall, export growth was 6.6%, rising by 0.7 percentage points from November despite the high base from the same period last year, demonstrating strong resilience. By region, exports to the US continued to be affected by the透支效应 of earlier "front-loading," with the year-on-year decline widening to 30.0%. Exports to the EU grew by 11.6% year-on-year, mainly benefiting from the reopening of key China-Europe Railway Express ports. Exports to emerging markets like ASEAN and BRICS countries also maintained double-digit high growth, supporting the overall export growth rate.
Over the medium to long term, China's transitional phase characterized by "strong supply, weak demand" and low inflation is difficult to change rapidly and possesses structural and periodic features. However, beneath this surface, the transition between old and new drivers is accelerating. The contribution of new drivers like high-tech manufacturing, modern services, and digital infrastructure investment to GDP growth is rising. Coupled with the 15th Five-Year Plan's clear prioritization of "building a modern industrial system" as a primary task, medium- to long-term growth's endogenous resilience and policy certainty are significantly enhanced. Therefore, the 2026 economy will not rely on traditional stimulus paths but will achieve stable operation based on structural optimization. Full-year GDP growth is projected at around 4.8%.
In the short term, since the third and fourth quarters of 2025, the growth rates of consumption and investment demand have declined noticeably. This waning momentum is expected to continue into early 2026, urgently requiring counter-cyclical policy support. According to the arrangements and policy orientation outlined at the year-end Central Economic Work Conference for the coming year, policy will be proactively front-loaded in the first year of the 15th Five-Year Plan. Consequently, the quarterly economic trajectory within the year will be closely linked to the intensity of policy implementation. Considering policies, base effects, and the overseas economic environment, first-quarter growth is projected at around 4.9%.
Domestic inflation weakened further in 2025. The full-year CPI grew by 0.0%, and PPI fell by 2.6% year-on-year, down 0.2 and 0.4 percentage points from their 2024 averages, respectively, continuing the low inflation pattern. Correspondingly, the GDP deflator fell by 1.0% year-on-year in 2025, with the decline widening by 0.2 percentage points from 2024, highlighting that the矛盾 of strong supply and weak demand remains the core constraint.
Prices continued their marginal recovery trend in December. The CPI grew by 0.8% year-on-year, up 0.1 percentage points from November, marking the fourth consecutive month of increase. Core CPI grew by 1.2% year-on-year, unchanged from November, remaining in the "1% era" for four consecutive months. Food prices rose noticeably year-on-year supported by a low base, while rising prices for gold and durables also provided important support. Service prices showed structural divergence, with housing and household service prices falling but medical service prices continuing to rise. Meanwhile, the PPI fell by 1.9% year-on-year, with the decline narrowing by 0.3 percentage points from November. It rose by 0.2% month-on-month, positive for three consecutive months, with the increase expanding by 0.1 percentage points. The nonferrous metals industry and policies related to "anti-involution" remained the main supports, with the nonferrous metals industry's monthly increase expanding, while the涨势 for anti-involution related industries moderated. The crude oil chain continued to be a drag. Furthermore, prices in some mid- and downstream industries like communications electronics and automobiles continued to fluctuate at low levels month-on-month, reflecting that demand constraints remain evident.
Looking ahead, as domestic policy focus systematically shifts towards expanding domestic demand, supported by anti-involution policies, the low base effect, and base period adjustments, the recovery trend for domestic inflation in 2026 appears relatively clear. Under the baseline scenario, the full-year averages for CPI and PPI are projected to moderately rebound to 0.7% and 0.0%, respectively, with PPI likely turning positive around the second quarter. However, affected by the shifting Lunar New Year, CPI growth in January and February 2026 is forecast at approximately 0.2% and 1.1%, respectively, while PPI declines are expected to narrow to around -1.7% and -1.5%. Notably, the 2026 price trajectory will largely depend on the recovery of demand and the implementation effectiveness of anti-involution policies, which will be the core factors influencing the inflation trend.
Financial data for 2025 exhibited characteristics of "aggregate expansion, front-loaded pace, but fiscal dependence and weak endogenous momentum." First, in terms of aggregate, AFRE, M2, and M1 grew by 8.5%, 8.5%, and 3.8% year-on-year, respectively, up 0.5, 1.2, and 2.6 percentage points from the previous year, providing relatively strong support to the real economy. Second, in terms of pace, AFRE, M2, and M1 all accelerated in the first half of the year, peaking and then declining sequentially in the third quarter, showing a "high before, low after" pattern. Third, a dual divergence appeared in the structure: 1) AFRE growth relied mainly on fiscal expansion. Government bonds increased by 2.54 trillion yuan year-on-year in 2025, accounting for 76% of the total year-on-year increase in AFRE. Their share of AFRE rose from 35% the previous year to 38.9%, while the share of credit dropped from 52.9% to 44.7%. 2) Within credit, the household sector was the main drag. New household loans for the full year were only 441.7 billion yuan, constituting a mere 2.7% of total new loans, a significant drop from the historical peak of 52.7% in 2017, reflecting weak credit demand from endogenous economic drivers like real estate and consumption. Meanwhile, corporate loans also relied mainly on short-term loans. New corporate loans increased by 1.14 trillion yuan year-on-year, with short-term loans up by 2.2 trillion yuan but medium- and long-term loans down by 1.26 trillion yuan. Fourth, the degree of monetary activation improved somewhat. The growth rate differential between household demand deposits and time/other deposits widened by 1.9 percentage points compared to the previous year, and the growth rate differential between corporate deposits and household deposits widened by 4.8 percentage points.
Financial data in December continued the declining trend since the third quarter, but signs of improvement emerged in corporate credit. First, AFRE growth slowed, and the new scale decreased by 646.2 billion yuan year-on-year. A year-on-year decrease in government bonds of over one trillion yuan was the main drag, while RMB loans (AFRE口径), off-balance-sheet financing, and corporate bonds all maintained year-on-year increases. Second, total credit increased less year-on-year, with an internal structure showing a "weak household, strong corporate" divergence. New RMB loans decreased by 80 billion yuan year-on-year. Short-term and medium- to long-term household loans decreased by 161.1 billion and 290 billion yuan year-on-year, respectively, constituting the main drag. Meanwhile, short-term and medium- to long-term corporate loans increased by 390 billion and 290 billion yuan year-on-year, respectively, showing positive improvement signals, potentially related to the low base effect, the implementation of政策性金融工具 improving infrastructure-related credit, and accelerated投放 of structural policy tools boosting growth in areas like green loans. Third, the slowdown in M1 growth was mainly related to the high base and the worse-than-expected real estate performance. Fourth, M2 growth unexpectedly rebounded against the trend, rising by 0.5 percentage points to 8.5%, primarily due to increased monetary creation resulting from improved corporate lending and a significant year-on-year decrease in non-bank deposits.
Looking forward, the trajectory of AFRE and M1 growth will primarily depend on the pace of fiscal support, and they may still face phased downward pressure in the first half of 2026. However, with the support of政策性金融工具 and intensified structural monetary policy, the possibility of a marginal stabilization in credit growth is increasing. Monetary policy is expected to maintain an accommodative stance. But given the recent rollout of eight structural tools, the central bank may need to wait for triggers such as sustained economic weakness or external shocks before implementing further comprehensive RRR or interest rate cuts.