China’s Economy to Expand by 4.9% in 2025, Braces for a Slower Start to the New Year

External demand continues to drive the Chinese economy. The country’s solid growth in the third quarter of 2025 was supported by resilient exports, although signs of weakness in domestic demand surfaced again, according to the World Bank’s latest China Economic Update. China’s gross domestic product (GDP) advanced 1.1% quarter-on-quarter between July and September, bringing cumulative growth for the year to 5.2% year-on-year.

“Despite trade policy uncertainty,“ the report notes, “demand from developing countries sustained exports.“ Moreover, “fiscal and monetary stimulus policies pulled domestic consumption and investment.“ However, the agency warns that household spending remains subdued, affected by a weak labor market and the wealth effects of falling house prices.

The World Bank expects China’s economic growth to moderate to 4.9% in 2025 (only one tenth less than in 2024) and 4.4% in 2026, in a scenario in which consumption will continue to be pressured by the real estate adjustment and cautious income expectations. Investment could receive a limited boost from new fiscal stimuli announced in October and from greater stability in global trade policy.

However, the institution stresses that “weak corporate margins and the prolongation of the adjustment in the real estate sector could dampen a stronger recovery”. Export growth will also tend to soften, although the partial reduction of tariffs after October could offer some additional support.

Despite trade policy uncertainty, demand from developing countries supported China’s exports, according to the World Bank

In this context, the World Bank points out that “the priority for China’s economic policy is to strengthen domestic demand in an uncertain external environment”. The report advocates “combining short-term stimulus with structural reforms aimed at strengthening social protection, improving the business environment, facilitating an orderly adjustment of the real estate sector and strengthening local fiscal sustainability”.

The organization also devotes a specific section to the high level of savings of Chinese households, which reaches 31% of disposable income, mainly concentrated in housing and bank deposits. To boost consumption, the World Bank considers it key to develop alternative financial instruments such as pension plans, life insurance or investment funds; to deepen capital markets and to advance in financial reforms that allow for a more efficient allocation of capital aligned with long-term growth.