Overall Economic Growth
In the fourth quarter of 2025, China's economic growth came in at 4.5%, which is weaker than the 4.8% seen in the third quarter, and matches the slow pace from the first quarter of 2023. Despite this slowdown, the full-year GDP number did hit President Xi Jinping’s target of 5%, according to data released by the National Statistics Bureau on Monday.
However, consumer spending remains subdued. Retail sales in December increased by only 0.9% from the previous year, falling short of the 1.2% economists had anticipated and lower than the 1.3% growth recorded in November. Investment also continued to decline. While manufacturing showed resilience, it was not strong enough to offset the weaknesses in other sectors. The ongoing real estate challenges continue to impact consumer confidence and spending habits.
Industry-Specific Trends: Metals and Energy
China's Steel Slowdown and Aluminum Records
China's aluminum output reached a new record in 2025, increasing by 2.4% to 45.02 million tons. In December alone, producers generated 3.87 million tons, marking the highest monthly output on record for the world's second-largest economy. The National Statistics Bureau indicated that the metal's production has been growing annually since 2020, with significant demand driven by electric vehicles, power grids, and renewable energy projects. President Xi Jinping had previously set a cap of 45 million tons in 2017 to manage oversupply and reduce carbon emissions, but current production levels are operating at the limit of this capacity.
Conversely, China's steel production saw a significant drop. Total output for 2025 decreased by 4.4% to 961 million tons in the fourth quarter, marking the first time production fell below 1 billion tons since 2019. December was particularly weak, with output at just 68.2 million tons, the lowest in two years. While the steel industry has not faced explicit production targets like aluminum, policymakers have expressed concerns about overproduction. The persistent property crisis has also contributed to reduced demand for steel.
China's Coal Production Reaches New Record Amidst Safety Measures
China's coal production surged to a new all-time high, reaching 4.83 billion tons, an increase of 1.2% from the previous year. This record output was achieved despite enhanced safety inspections in the latter half of the year, which led to temporary slowdowns at some mines. Following power shortages and factory blackouts in 2021, the government had encouraged energy companies to expand mining operations and boost coal supply to ensure energy security.
Deflationary Pressures and Monetary Policy
Despite record production in certain sectors, price levels across China have not shown significant improvement. The country's GDP deflator, a measure of price changes across the entire economy, has remained negative since 2023. Economist Larry Hu predicts that this deflationary trend could continue, potentially dropping another 0.5% in 2026, which would represent the longest period of deflation in China's history.
Lending activity has also contracted. New loans issued in 2025 amounted to 16.27 trillion yuan, approximately $2.33 trillion, the lowest figure in seven years. This indicates a reluctance among individuals and businesses to borrow, increasing pressure on the central bank to intervene. In response, the People's Bank of China recently took steps to stimulate the economy by cutting rates by 25 basis points and expanding support programs for agriculture, technology, and private enterprises.
Analysts at Goldman Sachs anticipate further interest rate cuts in the near future. They also expect the central bank to reduce its reserve requirement ratio by 50 basis points and lower the main policy rate by an additional 10 basis points in the first half of 2026.