Resilience in motion: China's 2025 economy and 2026 outlook

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinion and not necessarily the views of CGTN.

The global economic landscape in 2025 presents a complex and fragile recovery shaped by overlapping contradictions. According to the International Monetary Fund's (IMF) October World Economic Outlook, global economic growth is projected to slow from 3.3 percent in 2024 to 3.2 percent in 2025 and further decline to 3.1 percent in 2026. Growth in advanced economies is expected to remain subdued at just 1.5 percent, reflecting persistently weak momentum. Prolonged geopolitical conflicts, the restructuring of global industrial chains driven by rising trade protectionism and mounting financial risks have combined to create an external environment marked by heightened uncertainty.

Against this backdrop, China achieved its 5 percent growth target in 2025, an outcome that exceeded the IMF's earlier October forecast by 0.2 percentage points. For many years, China has contributed roughly 30 percent of global economic growth, cementing its role as an indispensable "ballast" for the world economy.

This performance was not accidental. It was the result of sustained efforts in macroeconomic regulation, innovation-driven development, the advancement of a dual-circulation development pattern, and strong institutional safeguards. Examining the logic of China's growth under external pressure not only reveals the sources of its resilience, but also clarifies the key drivers of global economic recovery, providing a measure of certainty for the world economy in 2026.

China's economic position in a shifting global landscape

The global economy is undergoing profound adjustment. The IMF has noted in its report that while extreme tariff hikes scenarios have been partially contained through various agreements, rising protectionism and labor supply shocks continue to constrain growth. Interaction between fiscal and financial vulnerabilities and higher borrowing costs has further amplified downside risks. Advanced economies face diverging inflation trends and mounting debt pressures, while emerging markets grapple with capital outflows and exchange-rate volatility, making the global recovery increasingly fragile.

In stark contrast, China's economy has demonstrated strong adaptability and resilience amid these challenges. The World Bank's December China Economic Update raised its 2025 growth forecast for China by 0.4 percent, citing proactive fiscal policy, appropriately accommodative monetary policy, and a diversified export market layout as key pillars of stability.

Building on its longstanding role as a major contributor to global growth, China has once again demonstrated in 2025 that, even under sustained external pressure, steady growth is achievable through a commitment to high-quality development, deeper reform and opening-up, and strong innovation-led strategies.

China's economic trajectory in 2025: Stability with progress

In 2025, China advanced high-quality development through the dialectical unity of "stability" and "progress." While maintaining overall economic stability, the country achieved notable gains in structural upgrading, the cultivation of new growth drivers, and deeper reform and opening up. The resulting development landscape was characterized by a solid foundation, accelerating new momentum, and increased openness.

From a quantitative perspective, China's economy grew by 5 percent in 2025, meeting the targets set at the beginning of the year. China's economic output surpassed 140 trillion yuan (around $21 trillion) for the first time, firmly securing China's position as the world's second-largest economy at the annual average exchange rate. Growth at a rate of around 5 percent not only aligns with China's potential, but also outpaces most major economies, contributing significantly to global expansion.

Key macroeconomic indicators further underscored this stability. In employment, 12.1 million new urban jobs were created in the first 11 months, exceeding the annual target of 12 million and underpinning income growth and consumer confidence.

Foreign exchange reserves stood at approximately $3.36 trillion at the end of December, slightly higher than at the beginning of the year, while the renminbi exchange rate remained basically stable at a reasonable and balanced level of around 7 yuan to the dollar, providing a favorable environment for foreign trade.

Domestic demand continued to recover and emerged as a major pillar of growth. A series of policies aimed at expanding domestic demand proved effective, with particularly impressive results from the consumer goods trade-in program, which generated over 2.6 trillion yuan in related consumption across home appliances, automobiles, home furnishings and other sectors, unleashing demand for consumption upgrades.

The services sector rebounded strongly, with the added value of the service sector increasing by 5.4 percent year-on-year. New forms of service consumption such as holiday spending, cultural consumption and health consumption became key growth drivers.

On the investment front, progress was made in major national projects and programs, ranging from those aligned with major national strategies to large-scale renewal of equipment.

Steady growth in investment in new infrastructure and major projects such as transportation and water conservancy supported current growth while strengthening the foundation for long-term development.

Beyond aggregate stability, China's progress was even more striking, with structural upgrading and innovation breakthroughs serving as core drivers of high-quality development. New quality productive forces accelerated as a new engine of growth. Value-added in the equipment manufacturing and high-tech manufacturing grew by 9.2 percent and 9.4 percent respectively, outpacing the growth of large-scale industry by 3.3 and 3.5 percentage points.

Breakthroughs were achieved in cutting-edge fields such as artificial intelligence (AI), humanoid robots and quantum computing. The core AI industry exceeded 1 trillion yuan in scale, and China's global market share in AI continued to rise, positioning the country as a key force in shaping global industrial transformation.

Multifaceted scientific and technological breakthroughs provided strong support for industrial upgrading. The Experimental Advanced Superconducting Tokamak, also known as "artificial sun," achieved steady-state long-pulse high-confinement plasma operation for 403 seconds, once again setting a world record.

Sustained increases in research and development (R&D) investment underpinned these advances. In line with the 14th Five-Year Plan target of "average annual growth of over 7 percent," total R&D spending exceeded 3.6 trillion yuan in 2024, laying the groundwork for improved innovation capacity.

Green transition became another defining feature of China's high-quality development, offering a Chinese solution to global climate governance while advancing domestic sustainability. By the end of 2025, clean energy accounted for 60 percent of China's total power generation capacity. Combined wind and solar capacity reached 1.68 billion kilowatts by the end of July in 2025, ranking first globally for several consecutive years.

According to the National Energy Administration, for the first time in global history, China's total electricity consumption in 2025 has exceeded 10 trillion kilowatt-hours. Viewed in a global context, the electricity usage of China alone now surpasses that of several major economies combined. It is more than twice the annual electricity consumption of the United States and it exceeds the combined total of the European Union, Russia, India and Japan.

China's new energy vehicle (NEV) industry continued to lead globally. NEV exports exceeded 2.6 million units in 2025, driving electrification of the automotive sector, reducing carbon intensity, and supporting global decarbonization in transportation.

Deepening reform and opening-up injected sustained vitality into the economy. At the end of 2025, the Hainan Free Trade Port officially launched its special customs operations on December 18, implementing a model of "freer access at the first line, regulated access at the second line, free flow within the island." The two-tiered customs systems enable freer trade between Hainan and areas outside China's customs border, while maintaining standard customs controls for the rest of the Chinese mainland.

From the launch of operations through January 10, 2026, customs authorities cleared 18,000 tons of goods to clear at the first line; imports under the zero-tariff policy reached 460 million yuan, with 62.12 million yuan in tariff exemptions. At the second line, processed goods worth 56.81 million yuan that met value-added requirements entered the mainland, with 2.3 million yuan in import duties waived.

This enhanced openness attracted a surge of market entities. From December 18 to January 10, 4,709 new foreign trade enterprises were registered in Hainan. Within 24 days after the official launch, the number of newly registered firms matched that of an entire quarter in 2025, pushing the total to more than 100,000. Total goods trade in Hainan grew by 19.6 percent year-on-year, underscoring strong growth momentum.

Meanwhile, the negative list for foreign investment remains the shortest nationwide, market further lowering access barriers, while the Belt and Road Initiative (BRI) continued to advance in depth. Trade volume expanded steadily, and cooperation with countries of the Association of Southeast Asian Nations (ASEAN), Central Asia and other regions deepened, injecting fresh impetus into global trade growth.

Core drivers of China's high growth amid external pressure

China's ability to sustain a medium-to-high growth rate of around 5.0 percent in 2025, outperforming major economies despite a complex and challenging external environment, rested on four mutually reinforcing factors: precise policy coordination, innovation-driven transformation, resilient dual-circulation support and fundamental institutional strengths. Together, these factors formed the underpinnings of China's resilience and stability.

Coordinated macroeconomic policies provided crucial support. Faced with a sluggish global recovery and volatile external demand, China adhered to the general principle of pursuing progress while ensuring stability, implementing proactive fiscal policy and prudent monetary policy to create a synergistic macro-control framework.

On the fiscal side, the issuance of ultra-long-term special treasury bonds effectively addressed funding gaps for major projects, while the expanded use of special-purpose bonds extended support beyond traditional infrastructure to new infrastructure and areas related to people's livelihoods.

On the monetary front, the central bank implemented multiple cuts to reserve requirements and interest rates, releasing long-term liquidity and reducing corporate financing costs. At the same time, structural monetary tools, such as relending for technological innovation, green relending and support instruments for inclusive micro and small loans, were deployed to target key sectors and weak links, thus easing financing constraints.

Moreover, deepening reform helped dismantle institutional barriers to growth. Tangible progress was made in building a unified national market: basic systems for market access, fair competition and property rights protection were improved; regional barriers and market segmentation were eased; and the efficiency of factor allocation increased significantly.

Legislation on promoting the private economy accelerated, with supporting policies clarifying the private sector's role in the national economy, protecting its legitimate rights and interests, and stimulating its vitality. Private enterprises expanded into areas from marine equipment to low-altitude aircraft, and accounted for over 70 percent of total foreign trade value among China's "little giant" enterprises focused on sophisticated, specialized, and novel technologies.

In emerging business models, private-sector exports through market procurement grew by 9.2 percent, becoming an important driver of foreign trade growth. Progress in factor-market reforms – including household registration reform, the development of a unified urban-rural construction land market, and the full implementation of a registration-based initial public offering system – improved the flow of talent, land, capital and other factors, supporting economic expansion.

Furthermore, accelerated innovation-driven transformation injected strong new momentum. Fostering new-quality productive forces became a core strategy for addressing external pressure and achieving high-quality development. Sustained investment in frontier technologies such as AI, new energy and quantum computing drove industrial upgrading and created new growth engines.

Synergy between basic and applied research led to a steady stream of breakthroughs. Four Chinese scientific achievements were included in Science magazine's top 10 breakthroughs of 2025, with China's leading role in the global rise of renewable energy ranked first. Faster industrial upgrading pushed "Made in China" toward "Created in China": the number of "lighthouse factories" reached 85, the highest in the world, setting global benchmarks for intelligent, green, and advanced manufacturing enterprises.

An improved innovation ecosystem, supported by a nationwide mechanism for tackling key core technologies, closer collaboration among industry, universities and research institutions and a more prominent role for enterprises as innovation pioneers, has led companies to account for over 77 percent of total R&D spending, while fostering a growing cohort of internationally competitive innovative firms.

Additionally, the complementary interaction between domestic and external demand built a resilient dual-circulation system, effectively cushioning the economy against external market volatility. China's super-large market of 1.4 billion people drove consumption upgrading, with strong demand for high-quality goods and services such as smart home appliances, 5G phones, healthcare and cultural tourism, providing ample space for the expansion of domestic demand.

On the external front, China's diversified export market delivered solid results: exports to ASEAN and BRI partner countries grew strongly, with ASEAN remaining China's largest trading partner. In the first 11 months of 2025, China-ASEAN trade reached 6.82 trillion yuan, up 8.5 percent year-on-year, accounting for 16.6 percent of China's total foreign trade, while exports to ASEAN rose by 14.6 percent to 4.29 trillion yuan, offsetting declines in exports to some advanced economies.

An optimized export structure enhanced risk resilience. Exports of NEVs, photovoltaic cells and lithium-ion batteries maintained rapid growth, with Chinese-brand NEV exports exceeding 2.6 million units. A stable and efficient industrial and supply chain system provided critical support. China's production capacity in solar cells, wind power equipment and lithium-ion batteries accounted for over 70 percent of the global total, ensuring domestic production stability while contributing to the resilience of global supply chain.

Finally, institutional advantages provided the fundamental political and systemic underpinning for China's stable growth under external pressure. Centralized and unified leadership by the Central Committee of Communist Party of China enabled effective balancing of development with security, increment with stock, and new growth drivers with old ones, formulating sound strategies and policies to address risks. In the face of trade protectionism and geopolitical conflicts, China could pool resources across regions and departments to respond effectively, ensuring economic stability.

Effective risk prevention and control create a safe environment. Orderly progress was made in local government implicit debt swaps, reducing debt risks; real estate regulation was refined on a city-specific basis, preventing extreme fluctuations and supporting a gradual stabilization; and reforms and risk resolution in small and medium-sized financial institutions achieved phased results, enhancing financial system stability.

China's role in supporting global economic recovery and creating opportunities

Amid a sluggish global recovery and rising uncertainty, China's stable growth and continued opening up have provided vital support to the world economy, created extensive development opportunities, and positioned the country as a stabilizer for global growth, a pool of opportunities for open cooperation, and a positive force in global governance.

Looking ahead to 2026, despite challenges and uncertainties, China's economy is expected to maintain stable growth, driven by policy continuity, the deepening of new quality productive forces, and expanding dividends from opening up, thereby injecting fresh momentum into global recovery.

China will continue to uphold a people-centered development philosophy, balance development and security, deepen reform and opening up, strengthen technological innovation, and promote high-quality development. By sustaining stable domestic growth, China will provide certainty to the world economy. Through continued openness and cooperation, it will create broader opportunities for global development.

In a period of widespread global uncertainty, the resilience and vitality of China's economy serves not only as the foundation for its own development, but also as a source of hope for global recovery. China stands ready to work with all countries to uphold multilateralism, oppose protectionism, promote the liberalization and facilitation of trade and investment, and maintain stable and smooth global industrial and supply chains, jointly building a community with a shared future for humanity and achieving mutually beneficial development between a resilient China and an open world.

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