China's Q4 Growth Slows to 4.5%, Lowest in Nearly Three Years, as Consumption Falls Short

• Retail sales grew only 0.9% in December year-over-year, missing the 1.2% forecast and reflecting weak consumer demand
• Fixed-asset investment contracted 3.8% for the full year, worse than the 3% decline economists expected, highlighting continued real estate sector struggles
• Industrial output climbed 5.2% in December, exceeding the 5% forecast, as manufacturers diversified exports away from U.S. markets

Summary: China's Q4 2025 Economic Growth Slows to 4.5%

China's economy expanded 4.5% in Q4 2025, marking the slowest growth rate in nearly three years and decelerating from 4.8% in Q3. Despite the quarterly slowdown, full-year GDP growth achieved 5%, meeting Beijing's official target of "around 5%."

Key Economic Indicators:

• Retail sales grew just 0.9% year-over-year in December, missing the 1.2% forecast and slowing from November's 1.3%, signaling weakening domestic consumption
• Industrial output rose 5.2% in December, exceeding the 5% expectation and improving from 4.8% previously
• Fixed-asset investment (including real estate) contracted 3.8% for the full year, worse than the forecasted 3% decline
• Urban unemployment held steady at 5.1% in December

Market Implications:

The data reveals China's economic challenges stem primarily from soft domestic demand and a continued real estate sector slump. The weaker-than-expected consumption figures are particularly concerning, as consumer spending remains subdued despite government efforts to stimulate the economy.

However, the economy has demonstrated resilience amid ongoing trade tensions with the U.S., supported by exporters diversifying away from American markets and lower-than-anticipated tariff rates. The manufacturing sector's strength, evidenced by better-than-expected industrial output, provides some offset to consumption weakness.

The mixed data suggests Chinese policymakers have thus far avoided deploying large-scale stimulus measures, though persistent domestic demand weakness and the ongoing property crisis may eventually necessitate more aggressive policy support. Investors should monitor whether Beijing shifts to more substantial intervention measures in 2026.