China's economy expanded at a 4.5% annual rate in the fourth quarter of 2025, the slowest pace in nearly three years, as consumer spending fell short of expectations and domestic demand remained subdued. The data highlights persistent challenges in reigniting private consumption and raises concerns about global demand outlook.
- China's Q4 GDP growth slowed to 4.5% year-on-year, weakest since 2023
- Retail sales rose 3.8%, below the 4.5% forecast, signaling weak consumption
- FXI and MCHI dropped 1.9% and 2.3% in early trading, reflecting equity market concerns
- CNY weakened to 7.32/USD, while DXY rose, indicating risk-off sentiment
- XLE and GLD saw modest declines amid reduced demand expectations for commodities
- Youth unemployment and property sector stress remain key constraints on recovery
China's gross domestic product grew at a 4.5% year-on-year rate in the fourth quarter of 2025, marking the weakest performance since mid-2023 and below market forecasts. The slowdown was primarily driven by underwhelming consumption, with retail sales increasing by just 3.8% in Q4, missing the projected 4.5%. Fixed asset investment rose 4.2%, while industrial output edged up 5.1%, signaling continued but uneven momentum across sectors. The deceleration underscores persistent structural headwinds, including cautious household spending, rising unemployment among youth, and lingering effects of property sector turmoil. Despite targeted policy stimulus, including interest rate cuts and expanded fiscal measures, demand-side recovery remains fragile. The consumer discretionary sector, a key barometer of sentiment, saw softer sales in both urban and rural areas, particularly in durables and services. Markets reacted swiftly: the FXI and MCHI indexes declined 1.9% and 2.3% respectively in early Asian trading, reflecting concerns over export-reliant equities. Commodity markets were also affected, with XLE and GLD seeing modest declines as weaker Chinese demand dampened expectations for energy and precious metals. The CNY weakened to 7.32 per USD, while the DXY advanced, indicating a broader risk-off shift in global FX flows. The AUD also dipped, pressured by reduced trade exposure to China. The data intensifies scrutiny on Beijing's next policy moves, with expectations rising for additional targeted measures to support consumption and stabilize property markets. Investors are now reassessing the trajectory of global supply chains and demand patterns, particularly for materials and energy exporters.