China recently announced 5 percent GDP growth in 2025. This growth was largely driven by growth in the export sector, reporting a record-setting $1.2 trillion trade surplus. This is despite a 20 percent decline in exports to the US. In order to make up for lost sales to the US due to tariffs, China found other customers in Europe and Latin America for their manufactured goods.

As a long-term growth strategy, it is unlikely that China will be able to rely on growth in the export market for long, however. Domestically, retail sales only grew at 3.7 percent, while property investment fell by over 17 percent. Fixed asset investment (roads, bridges, etc.) also fell in 2025, signifying local governments are under pressure to reduce their debt. Unless China can implement policies that stimulate domestic consumption, they are likely to see much slower growth numbers in the future.

Discussion Questions:

  1. China is experiencing a population decline. How might that affect GDP?
  2. Why might stimulating consumer demand be a better growth strategy than pursuing increases in fixed asset investment?