China: Robust production, lackluster demand – Standard Chartered

China achieved its 5% growth target in 2025, with Q4 growth largely in line with market expectations. Resilient exports and robust production were key supports, while services remained a stabilising factor. However, domestic demand was weak, led by declining investment, likely warranting more policy support, Standard Chartered's economists report.

Uneven growth

"China’s GDP grew 4.5% y/y in Q4, meeting the 5% target for 2025. Industrial output was bolstered by robust exports, which rose 5.5% for the year, driving a record goods trade surplus of c.6% of GDP. Net exports contributed 1.6ppt to headline growth. The services sector, supported by a strong financial market, also continued to support growth. However, investment declined, with the weakness spreading beyond housing. Consumption softened in Q4 as the effectiveness of the goods trade-in programme faded, despite official data showing solid income growth."

"Deflation eased by year-end, but pressures may persist given ongoing supply-demand imbalances that could hurt industrial profits and investment. New CNY loans dropped sharply for both households and businesses. The decline in housing fixed asset investment (FAI) deepened, weighing on total FAI, while falling home prices further dampened consumer sentiment."

"We forecast 4.6% growth for 2026, with the official target likely to be revised to 4.5-5.0%. The government appears to be refocusing on long-term economic transformation to achieve sustainable growth. We think policy support will be front-loaded to maintain momentum, while stimulus will focus on high-tech and green development industries, and boosting services-sector consumption."