China achieved its 5% annual GDP growth target for 2025, but recent data reveals a sharp slowdown in Q4, raising concerns about domestic demand and global market stability. The slowdown is reflected in deteriorating industrial output, retail sales, and credit activity.
- China's 2025 GDP growth reached 5.0%, meeting the official target
- Q4 growth slowed to 4.2%, down from 4.7% in Q3
- Industrial output contracted 0.3% month-on-month in December
- Retail sales rose only 3.8% year-on-year in December
- December credit expansion reached RMB 980 billion, below expectations
- CSI300, WTI, and copper prices all declined; CNH weakened 1.6%; AUDUSD dropped 2.3%
China’s economy expanded by 5.0% year-on-year in 2025, meeting the official growth target, but the final quarter signaled a marked deceleration. Q4 GDP growth slowed to 4.2%, down from 4.7% in Q3 and significantly below the 5.1% average in the first half of the year. This deceleration was driven by a contraction in industrial production, which declined 0.3% month-on-month in December, the first drop since mid-2023. Retail sales rose only 3.8% year-on-year in December, a sharp drop from 6.1% in October, indicating weakening consumer demand. The slowdown is also evident in financial indicators. Credit expansion in December was limited to RMB 980 billion, below the market expectation of RMB 1.2 trillion, with both corporate and household lending falling short. The property sector remains under pressure, with new home sales declining 12.4% year-on-year in Q4 and developers defaulting on debt obligations at a rising pace, dampening investor confidence. This weakening momentum has ripple effects across global markets. The CSI300 index fell 2.8% in December, dragging down the broader Asian equity market. Commodity prices reacted sharply: WTI crude oil dropped 3.5% over the month, and copper prices declined 4.1% as demand concerns from China’s manufacturing sector intensified. Gold (XAUUSD) rose 1.9% as risk aversion increased, while the Chinese yuan (CNH) weakened 1.6% against the dollar, reflecting capital outflow pressures. Export-oriented economies such as Australia are particularly exposed. The AUDUSD exchange rate fell 2.3% in January, driven by concerns over reduced demand for iron ore and coal. Investors are now recalibrating expectations for global growth, with tighter financial conditions and lower commodity demand likely to persist if domestic stimulus efforts fail to revive momentum.