China announced that its economy grew by 5% last year, meeting Beijing's official target, with a record trade surplus helping to support overall economic expansion.

Although growth slowed to 4.5% in the final three months of 2025, the world's second-largest economy still achieved its annual goal.

Over the past year, China has faced challenges including weak domestic consumption, a prolonged property crisis, and disruptions caused by U.S. President Donald Trump's tariff policies.

Experts say the data suggests a “two-speed” economy, where manufacturing and exports continue to drive growth, while consumers remain cautious and the property sector continues to weigh on overall performance.

Despite official figures showing the growth target was met, some analysts have questioned the accuracy of the data given weak investment and consumer spending.

“We believe actual growth was weaker than the official figures suggest,” said Zichun Huang, China economist at Capital Economics, who estimates the data may overstate economic expansion by at least 1.5 percentage points.

Data released Monday also showed that China recorded its lowest number of births since records began in 1949. According to the National Bureau of Statistics, total births in 2025 fell to 7.9 million.

Economists warn that declining birth rates will weaken demand for housing and consumer goods, adding pressure to domestic challenges and further straining the already troubled property market.

Officials said China's population fell for a fourth consecutive year in 2025, dropping by 3.4 million to 1.4 billion people.

These figures highlight a deepening demographic crisis, despite government efforts to encourage families to have more children through incentives.

Last week, China reported its largest-ever trade surplus — the gap between exports and imports — reaching $1.19 trillion (£890 billion), largely driven by increased exports to markets outside the United States.

“China is effectively sacrificing profits to drive growth through exports, which is not sustainable. Cutting prices may maintain sales volumes, but it damages profitability and ultimately growth,” Alicia Garcia-Herrero, Chief Economist for Asia-Pacific at Natixis, told the BBC.

Kang Yi, head of China's National Bureau of Statistics, said Monday that the economy “faces challenges such as strong supply but weak demand,” but added that China is expected to maintain “stable and healthy growth” this year.

Analysts warn that growing reliance on exports makes China more vulnerable to global trade tensions, particularly amid uncertainty surrounding U.S. tariff policies.

Trump has recently threatened new tariffs on countries trading with Iran or opposing his plans regarding Greenland. China and several other Asian countries import oil from Iran.

China's economic resilience may partly reflect lower-than-expected U.S. tariffs after Beijing and Washington agreed to suspend certain measures, though the agreement is set to expire in November 2026.

Domestic challenges are most evident in the real estate sector. Beijing continues to grapple with a prolonged housing downturn and rising local government debt, which has discouraged corporate investment and made consumers more cautious.

New data released Monday showed housing prices continued to fall in December, as authorities struggle to stabilize the property market. Prices declined 2.7% year-on-year — the sharpest drop in five months — while real estate investment fell 17.2% compared with the previous year.

The prolonged slump has had a significant impact because the property sector once accounted for roughly a quarter of China's economy, affecting construction activity, household wealth, and local government finances.

Millions of families face unfinished homes or sharply declining property values, undermining confidence in what was once considered one of the safest forms of savings.

Meanwhile, retail sales rose just 0.9% in December — the slowest growth in three years — even as factory output increased by 5.2%, up from 4.8% in November.

Natixis noted that once the 5% growth target appeared secure, policymakers seemed to pause additional stimulus measures, effectively preserving resources for this year.

Chinese leaders have pledged to adopt “proactive” policies to boost consumer and business confidence, but data suggests that underlying economic fundamentals remain fragile.

Beijing now faces a delicate balancing act: stimulating growth while controlling rising debt, and navigating an increasingly uncertain trade environment without becoming overly dependent on exports.