China's Economic Slowdown: Navigating Trade Tensions and Domestic Challenges

China's economic growth hit a three-year low in Q4 2025, despite meeting the annual target of 5% due to external trade diversifications. Domestic demand weakened amidst a property crisis, while export reliance highlighted vulnerabilities. Analysts urge transitioning towards consumption-led growth for long-term stability.

China's economic growth slowed to a three-year low in the fourth quarter of 2025, according to the National Bureau of Statistics. The world's second-largest economy grew 4.5% year-over-year in Q4, as domestic demand declined amid persistent trade tensions and structural imbalances.

Despite meeting the official target of 5% growth for the year, reliance on external demand reveals vulnerabilities. A staggering trade surplus of $1.2 trillion was reported, largely due to exporters diversifying away from U.S. markets. Yet, the protracted property crisis and deflationary strains weigh heavily on China's domestic market.

This slowdown occurs as Chinese leaders keep a 'proactive' fiscal policy, cutting specific rates to stimulate demand, while analysts emphasize the need for a shift towards consumption-led growth. With weaker household incomes and high savings rates, significant policy challenges remain to enhance household spending within the economy.