China’s economy grew 5 per cent in 2025, Beijing said on Tuesday, matching the previous year’s pace despite a deep property downturn, persistent deflation worries and a renewed tariff onslaught from Washington under President Donald Trump.
Behind the headline number, officials concede that one engine did most of the work: exports.
“Without the external sector, we would be looking at a very different growth number,” said a senior adviser to the State Council in Beijing, speaking on condition of anonymity. “Domestic demand is still not where it needs to be.”
Export boom, weak home front
China’s exports reached about $3.77tn last year, up 5.5 per cent, even as shipments to the US dropped 20 per cent under the pressure of Trump’s escalating tariffs.
The shortfall was covered by an aggressive push into south-east Asia and Europe, as factories redirected goods that were struggling to find buyers at home.
In December, exports hit a record $357.8bn, up 6.6 per cent from a year earlier and beating most economists’ expectations.
“Factories that once sold air conditioners, cars or steel mainly to Chinese households are now looking abroad,” said Li Na, a purchasing manager in Guangdong. “The domestic market feels tired. Overseas, at least for now, still feels open.”
Her company, which makes metal parts for vehicles and industrial machinery, has repeatedly cut prices to win contracts in the EU and ASEAN.
“We win on price,” she said. “But our profits are thinner than ever.”
Inside China, the consumer mood remains cautious. The property crash that began in 2021 has knocked household wealth, while an ageing population and rising job insecurity have made families reluctant to spend.
“People are afraid to spend,” said a Beijing shop owner, who asked to be identified only as Mr Zhang. “They worry about their jobs, their mortgages, even about having children. Sales have never really come back.”
Tariffs bite in America, China finds other buyers
Trump’s renewed tariff campaign, rolled out after his return to the White House, has hit a broad range of Chinese imports, from electric vehicles and batteries to machinery and basic consumer goods.
On paper, such measures should have dealt a serious blow to China’s export model. In practice, they have sped up a reshaping of global trade routes.
“US tariffs hurt, but they do not isolate China,” argued Mei Lin, chief Asia economist at a European bank. “They rewire trade. Goods that can’t go to Los Angeles go to Jakarta, Hamburg or São Paulo instead.”
Chinese exporters have fallen back on familiar strengths: lower export prices, deep integration into global supply chains and steadily improving product quality, especially in machinery, transport equipment and electronics.
Price cutting has been relentless. Since mid-2023, export prices have drifted lower, making it harder for rivals in Europe, Japan and emerging Asia to compete.
“At these prices, many local manufacturers simply cannot compete,” said an EU trade official, referring to surging imports of Chinese electric vehicles and industrial equipment. “That is why you are seeing louder calls for countermeasures here as well.”
A record surplus, rising friction
China’s trade surplus climbed to a record of about $1.2tn in 2025, roughly 20 per cent higher than the year before, as exports rose and imports barely moved.
The scale of that gap is fuelling alarm in capitals far beyond Washington.
“This is not just a China-US story any more,” said a former US trade negotiator now at a Washington think-tank. “It is China versus everyone trying to protect their own industries from an export wave.”
European policymakers have launched investigations into alleged dumping in sectors such as electric vehicles and solar panels. In ASEAN, governments that once courted Chinese supply chains now face pressure from domestic manufacturers who say they are being undercut.
Inside China, by contrast, the swollen surplus is widely seen as a lifeline. With a fragile property sector, heavily indebted local governments and stubbornly weak consumption, policymakers have leaned hard on what one official called “the external safety valve”.
“Exports are doing the stabilising work that domestic demand is not doing,” said the State Council adviser. “But we know this cannot go on forever.”
“Made in China 2025” comes of age
The export surge has also underscored how far Beijing’s industrial strategy has come.
The “Made in China 2025” plan, launched a decade ago, set out to push the country up the value chain into high-tech manufacturing and to reduce reliance on foreign technology and imported parts.
That bet now appears to be paying off.
High-end machinery, telecoms equipment, electric vehicles and batteries have become star performers in China’s export mix. At the same time, more traditional labour-intensive industries such as textiles and furniture have stepped up overseas sales to soak up excess capacity at home.
“China is not just exporting cheap toys any more,” said Mei. “It is exporting the products that many countries see as strategic for their own futures. That is what makes today’s trade tensions so much more complex.”
China’s appetite for imports, by contrast, has faded. For much of the past two decades, imports tended to grow roughly in line with GDP. Since the pandemic, that link has broken down.
Greater self-reliance in areas such as semiconductors and green technologies, reduced fossil fuel use and weak domestic demand have all held back import growth.
“China is buying less from the world while selling more to it,” Mei said. “That is a recipe for political backlash.”
A fragile foundation at home
Beneath the 5 per cent growth figure lies an economy that many analysts see as unbalanced and exposed.
Deflationary pressure lingers across a wide range of consumer and producer prices, as industrial overcapacity collides with wary households. New home sales remain far below pre-crisis levels, and younger Chinese face a jobs market with fewer secure, well-paid positions.
“The growth model has tilted even more towards factories and away from families,” said a Shanghai-based economist at a global asset manager. “You can see it in the data and you can feel it on the streets.”
Beijing has resisted a large-scale, consumption-led stimulus, opting instead for targeted support and continued backing for manufacturing and strategic sectors.
Officials say that heavy industry and high-tech manufacturing are essential to long-term competitiveness and national security. Critics counter that doubling down on exports while domestic demand stalls merely delays a more painful adjustment.
“If global demand turns down or trade barriers rise further, China does not yet have a strong consumer engine to fall back on,” the Shanghai economist said.
A growth model on borrowed time?
For investors and trading partners, the result is a paradox: a China that looks solid in the macro data but fragile close up.
Export-led growth has delivered another year of respectable headline numbers and kept factories busy. It has also intensified trade frictions, strained relations with key partners and left unresolved the domestic weaknesses that first pushed China to lean so heavily on foreign demand.
As Trump’s tariffs harden into a more permanent framework and Europe weighs its own defensive measures, Beijing faces an uncomfortable choice: stick with an export-heavy model that risks further conflict, or accept the disruption of shifting power and income back towards its own households.
The question hanging over global markets is straightforward: how long can the rest of the world absorb China’s surplus before it pushes back even harder?
