China’s economy hit an impressive new high point this year, notching $1.19 trillion (£890 billion) trade surplus—the largest on record. The nation is still at an inflection point. Its population has dropped by 339 million to 1.41 billion, hammering home an already alarming development in this ongoing demographic disaster. This decline in population has now lasted four years running, further deepening challenges attracting new economic growth and investment.
By the last quarter of 2025, as China’s economic growth continued to slow in glaring fashion. The economy grew by just 4.5% over last year at this time. This figure was nowhere near the government’s goal of “approximately 5%.” The target was set after last year’s 5% growth rate was a success. As the country continues to work through many other domestic economic challenges, it cannot ignore the effects of a falling birth rate. In 2022, China’s birth rate dropped to a record low of only 5.63 births per 1,000 population.
Even with these headwinds, a few sectors of the economy persevered. And yet factory output even through December is 5.2% higher than a year ago. Still, retail sales fell short of expectations, rising just 0.9% in December—the slowest monthly line growth seen in three years. The property market was hit particularly hard. Investment dropped a staggering 17.2% year-over-year, and house prices declined 2.7% in December from one year prior.
Chinese leaders understand the very difficult economic headwinds they face. In their 14 macroeconomic policy commitments, they’ve committed to adopt “proactive” fiscal policies aimed at stimulating growth and stabilizing the economy. Chinese exporters are retreating from the American market. This transition is further complicating already rapidly changing global trade patterns.
Louise Loo, Head of Asia Economics at Oxford Economics, explained it this way,
“China’s reported GDP of 5% is not surprising given the political incentives to ensure headline stability, but this clearly masks the horrible investment data.”