China met its 2025 GDP growth target of 5.0%, propelled by a 12.3% year-on-year surge in exports, but domestic consumption and investment showed persistent stagnation, signaling an uneven recovery. The divergence highlights structural challenges amid global trade momentum.
- China met its 2025 GDP growth target of 5.0%, driven by a 12.3% YoY export surge
- Domestic retail sales grew just 2.9%, and fixed asset investment rose 3.8%
- CYB index rose 4.1% on export-oriented equities; USDCNY held near 7.25
- XLE and EWH ETFs showed gains tied to China’s export demand and industrial output
- Persistent property sector weakness and consumer caution remain structural concerns
- Policy focus likely to shift toward stimulating domestic demand despite external strength
China officially achieved its 2025 national GDP growth target of 5.0%, according to preliminary data released in early January 2026. The achievement was driven overwhelmingly by a robust export performance, which expanded by 12.3% year-on-year, fueled by strong demand for industrial goods, electronic components, and renewable energy equipment from Europe, Southeast Asia, and North America. Despite the export-led rebound, domestic economic activity showed signs of strain. Fixed asset investment rose only 3.8%, below expectations, while retail sales increased by just 2.9%, indicating sluggish consumer sentiment. The property sector remained under pressure, with new home sales declining 7.2% year-on-year and developers continuing to face liquidity constraints. Key market indicators reflected this duality. The CYB index, tracking Chinese small- and mid-cap stocks, rose 4.1% for the month, supported by export-oriented technology and industrial firms. Meanwhile, the USDCNY exchange rate stabilized near 7.25, suggesting resilience in the yuan amid trade inflows. In commodities, XLE, a U.S. energy sector ETF, gained 3.6% on expectations of sustained demand from Chinese manufacturing, while EWH, a China-focused ETF, edged up 1.8% on export optimism but underperformed broader emerging markets. The divergence between external strength and internal weakness is likely to influence policy decisions in Beijing. While export growth supports global supply chains and commodity demand, the lack of domestic momentum may prompt further targeted fiscal or monetary stimulus. Investors are closely monitoring indicators like industrial production, consumer confidence, and property data for signs of a broader economic turnaround.