China Hits 5% Growth in 2025 but Faces Rising Debt and Uneven Gains

China Reaches 5% Economic Growth in 2025

China’s economy expanded by 5 percent in 2025, meeting the government’s official goal while crossing a symbolic milestone: a total GDP exceeding 140 trillion yuan ($20 trillion). The achievement came despite headwinds from a weak property sector, mounting local government debt, and sluggish domestic demand.

Global observers praised China’s export performance and manufacturing resilience, yet the story behind the numbers reveals a more uneven picture. Growth momentum softened toward the end of the year, slowing to 4.5 percent in the final quarter — the weakest quarterly gain since late 2022.

Exports Drive Momentum Amid Weak Consumption

The export sector proved to be China’s economic anchor in 2025. A record trade surplus nearing $1.2 trillion helped sustain growth even as consumers tightened their belts.

Total trade rose 3.8 percent to 45.47 trillion yuan, continuing nine straight years of growth.
Trade with Belt and Road partners surged 6.3 percent, accounting for more than half of total trade.
High-tech exports climbed 13.2 percent to 5.25 trillion yuan, underlining China’s transition toward advanced manufacturing.

Meanwhile, retail sales increased 3.7 percent to a historic 50 trillion yuan. Spending on services such as tourism, culture, and entertainment grew steadily, representing 46.1 percent of per capita consumption — a sign of China’s gradual shift toward a consumption-based economy.

Regional Gaps Reveal Uneven Recovery

Not all parts of the country shared equally in the recovery. Around half of China’s provinces failed to meet their local targets, exposing deepening gaps between coastal powerhouses and struggling inland regions.

Guangdong, China’s largest provincial economy, expanded by only 3.9 percent — well below its 5 percent goal — as the property slump and weak demand hit manufacturing hubs.
Some bright spots emerged: Dalian became the first city in northeast China to surpass 1 trillion yuan in GDP, while Wenzhou joined Zhejiang Province’s growing list of trillion-yuan economies.
Shandong also crossed a major milestone, becoming the third province after Guangdong and Jiangsu to exceed 10 trillion yuan in total output.

This regional imbalance underscores the challenges facing policymakers as China aims to rebalance growth between industrial and service hubs, urban and rural economies.

Debt Soars Past 300% of GDP

The more troubling development of 2025 was China’s rapidly rising debt ratio. According to the National Institution for Finance and Development, total debt — including government, corporate, and household borrowing — jumped to 302.3 percent of GDP, the highest on record.

The sharp increase wasn’t due to excessive credit growth, analysts say, but rather weak nominal GDP expansion of just 4 percent, the lowest figure since reforms began in 1978 (excluding pandemic years).

What’s Driving the Leverage Spike

Local government borrowing: Debt climbed as authorities issued more bonds to stabilize growth and manage financial stress in municipalities.
Household debt stagnation: Mortgage lending contracted for the eleventh straight quarter as homebuyers remained cautious.
Corporate debt: Large state-owned firms continued to borrow heavily to fund infrastructure and industrial upgrading.

Policy Outlook: Stability Over Speed

Officials are now signaling a new phase focused on “high-quality development” rather than headline growth. This means:

Encouraging consumption in smaller cities
Expanding green industries and high-tech sectors
Strengthening fiscal transparency to control local debt risks

China’s 2026 Challenge: Quality Growth Under Pressure

As China enters the first year of its 15th Five-Year Plan (2026–2030), the balancing act between growth, stability, and debt control will define its economic narrative. The government faces the difficult task of sustaining employment and confidence without fueling another credit bubble.

For investors and global observers, China’s 2025 performance highlights both resilience and fragility — a strong export engine paired with deep structural vulnerabilities that policymakers can’t afford to ignore.