China closed 2025 with a stronger-than-expected tally: GDP rose 5.0% year-on-year and the economy surpassed RMB 140 trillion in aggregate output for the first time. That result marked a third consecutive year of growth at or above 5%, and economists say it reflects a mix of resilient external performance, a strengthening capital market and accelerating structural change at home.
Senior economists who tracked last year highlight an emergent "optimistic narrative" driven by technology and industrial resilience. High-technology industry value added expanded markedly—about 9.4% year-on-year within large industrial firms—while high-tech product exports rose some 13.2%, outpacing overall exports and signalling an internal reallocation of China’s growth engines.
Looking into 2026, the consensus among chief economists is for active, coordinated macro policy to offset softer external demand. Fiscal instruments, particularly new policy-oriented financing vehicles and front-loaded infrastructure projects tied to the 15th Five-Year Plan, are expected to support a rebound in infrastructure activity in the first quarter and lift annual broad infrastructure investment growth toward the mid-single digits.
Monetary policy is likely to remain moderately accommodative and more targeted, with scope for further easing of structural tools and even conventional measures such as reserve requirement or policy rate adjustments if downside risks crystallize. Policymakers are signalling a tilt from external stimulus toward bolstering domestic demand, with consumption and services consumption explicitly framed as the stabilisers for 2026.
Forecasters expect consumption to regain momentum as confidence and services spending recover, with retail sales possiblly rebounding toward roughly 5% growth and service consumption becoming the main engine of demand. Investment is projected to shift too: manufacturing investment may see a steady recovery near 5.2% annual growth, but industrial value added growth is expected to slow modestly to about 4.9%, marking a reorientation of growth from manufacturing to services and new-technology sectors.
Beyond the near term, economists are unanimous that the deeper story is an ongoing structural upgrade anchored in what they call "new quality productivity"—a catch-all for AI applications, high-tech manufacturing and innovation-driven output. Complementing industrial policy, several economists emphasise the need for institutional reforms that raise household incomes and public spending on education, health and pensions to sustain domestic demand. The trade-off for Beijing will be executing fiscal and reform measures without destabilising local finances or reigniting property-sector volatility.
The implications extend beyond China’s borders. A policy-driven domestic rebound would support demand for commodities, temper disinflationary pressures in commodity exporters, and shape global investment flows into technology and capital markets. But success is not guaranteed: weaker external demand, an under-resolved property sector and constrained fiscal space at local levels remain clear downside risks that could blunt the payoff from Beijing’s coordinated policy push.