Can China Achieve Growth Amid Trump Tariffs?

China's economy experienced a growth rate of 5% in 2025, primarily driven by record exports, allowing it to meet its annual target. However, despite this achievement, challenges remain, including a struggling domestic market and a significant property crisis that has led to declining consumer confidence and investment. With a reported trade surplus of $1.19 trillion (£890 billion) and ongoing difficulties in boosting domestic spending, China's economic landscape presents a complex picture for the future.

Last updated: 05 October 2023 (BST)

What’s happening now

As of now, China's economy is navigating a dual pathway of impressive export performance countered by significant internal challenges. The reported 5% growth is a positive indicator, yet the underlying data suggests a more nuanced reality. Growth in the last quarter of 2025 slowed to 4.5%, signalling potential concerns about the sustainability of this growth trend. The ongoing property crisis and rising local government debt are hampering domestic investment and consumer spending, essential components for a balanced and robust economic recovery.

Key takeaways

• China's economy grew by 5% in 2025, meeting its annual target.
• The trade surplus reached a record $1.19 trillion (£890 billion), driven by exports.
• Domestic challenges include a falling property market and cautious consumer spending.
• Retail sales grew by only 0.9% in December, the slowest in three years.
• China's population decreased for the fourth consecutive year, highlighting demographic concerns.

Timeline: how we got here

Over the last few years, several significant milestones have shaped China's economic landscape:

• December 2025: Retail sales grew by only 0.9%, the slowest rate in three years, while factory output rose by 5.2%.
• December 2025: House prices fell by 2.7%, the largest decline in five months, indicating ongoing struggles in the property market.
• 2025: China's GDP growth reached 5%, amid efforts to boost domestic spending and reliance on exports.
• 2024: Trade tensions with the US led to reduced tariffs, enabling a shift in export focus to other markets.
• 2023: China's demographic issues began to surface more prominently, with a declining population and birth rate.

What’s new vs what’s known

New today/this week

Recent figures indicate a slowdown in economic growth in the last quarter of 2025, at 4.5% compared to the previous year, prompting concerns about the sustainability of China's growth. Additionally, retail sales have exhibited the slowest growth in three years, highlighting a cautious consumer environment.

What was already established

China had set a target of around 5% economic growth for 2025, aligning with its long-term strategy to transition towards more sustainable domestic consumption while reducing reliance on exports. The challenges in the property market and rising local government debt were already known concerns that have persisted over recent years.

Impact for the UK

Consumers and households

For UK consumers, the implications of China's economic performance are multifaceted. A stable economic environment in China could lead to lower prices for imported goods, as increased exports might help balance global supply chains. However, if China's domestic struggles persist, it could lead to increased prices as manufacturers grapple with costs and supply constraints.

Businesses and jobs

UK businesses that rely on exports to China may find opportunities in the growing markets outside of the US, particularly as China's focus shifts from American markets. However, the ongoing property crisis and local government debt may lead to reduced investment opportunities and a tightening of credit, which can impact UK firms operating in China.

Policy and regulation

UK policymakers will be monitoring China's economic trajectory closely, as shifts in China's economic health can have ripple effects across global markets. Upcoming consultations and discussions regarding trade policies may be influenced by China's efforts to stabilise its economy and address its demographic challenges.

Numbers that matter

• 5%: China's GDP growth rate for 2025, meeting the government’s target.
• $1.19 trillion (£890 billion): The record trade surplus reported by China.
• 4.5%: The economic growth rate for the final quarter of 2025, indicating a slowdown.
• 2.7%: The decline in house prices in December 2025, the sharpest in five months.
• 0.9%: The growth rate of retail sales in December 2025, the slowest in three years.

Definitions and jargon buster

• GDP: Gross Domestic Product; a measure of economic activity representing the total value of all goods and services produced over a specific time period.
• Trade surplus: The amount by which the value of a country's exports exceeds the cost of its imports.
• Tariffs: Taxes imposed on imported goods, intended to protect domestic industries from foreign competition.
• Demographic crisis: Refers to significant changes in population characteristics, such as birth rates and overall population decline.

How to think about the next steps

Near term (0–4 weeks)

In the immediate future, it is essential for stakeholders to monitor China's consumer spending trends and property market developments closely. Any significant changes in retail sales or property prices could signal broader economic shifts.

Medium term (1–6 months)

Over the medium term, businesses should prepare for potential changes in trade policies and consumer demand as China seeks to boost domestic spending. This may involve diversifying supply chains and exploring new markets outside of China.

Signals to watch

• Retail sales growth rates.
• Trends in property prices and investment levels.
• Changes in tariffs or trade agreements impacting exports.
• Population statistics and demographic trends.

Practical guidance

Do

• Stay informed on China's economic policies and market conditions.
• Consider diversifying export markets to reduce dependence on China.
• Engage with local experts to navigate the complexities of the Chinese market.

Don’t

• Ignore signals of slowing economic growth in China.
• Overlook the impact of demographic changes on consumer behaviour.
• Assume current trade relationships will remain stable without change.

Checklist

• Review current supply chain strategies for potential risks.
• Assess the impact of changes in consumer spending on your business.
• Monitor key economic indicators from China and adjust forecasts accordingly.
• Engage with trade associations for insights on market changes.
• Evaluate your product offerings in light of shifting consumer preferences.

Risks, caveats, and uncertainties

The current economic data from China presents a mixed picture, with concerns about the accuracy of officially reported figures amid significant domestic challenges. The property crisis and demographic decline pose substantial risks to long-term economic stability. Moreover, the geopolitical landscape, especially regarding trade tensions with the US and other nations, adds an element of uncertainty that could alter market dynamics unexpectedly.

Bottom line

China's economy is at a crossroads, with a reported growth of 5% overshadowed by underlying issues such as a property crisis and demographic decline. As the country seeks to shift its economic model towards more sustainable domestic consumption, businesses and policymakers in the UK must remain vigilant to the implications these changes may hold for trade, investment, and overall economic health.

FAQs

What is the current growth rate of China's economy?

China's economy grew by 5% in 2025, although growth slowed to 4.5% in the final quarter of the year.

How has China's trade surplus affected its economy?

The record trade surplus of $1.19 trillion (£890 billion) has helped to bolster China's economy, particularly through strong export performance.

What are the main challenges facing China's economy now?

China is currently grappling with a property crisis, rising local government debt, and a declining birth rate, all of which are impacting economic growth and consumer confidence.