Sun Lee
China’s economic performance in 2025 has sharply diverged from the optimistic official narrative, with credible independent estimates suggesting growth was at best just 2.5–3 percent — roughly half of the government’s stated target of “around 5 percent.”
This stark contrast raises critical questions about the true health of the world’s second-largest economy, the reliability of official statistics, and the structural weaknesses that continue to burden its long-term trajectory.
Official targets vs. independent estimates
At the outset of 2025, Beijing reaffirmed an ambitious GDP growth target of around 5 percent, a figure accompanied by assurances of resilient domestic demand and robust policy support.
Official data released through the first three quarters showed a 5.2 percent year-on-year expansion, a statistic presented as evidence of economic stability and progress.
However, a comprehensive report by the U.S-based Rhodium Group — titled China’s Economy: Rightsizing 2025, Looking Ahead to 2026 — paints a dramatically different picture.
According to this analysis, China’s real GDP growth for the full year likely ranged only between 2.5–3.0 percent after a marked slowdown in the latter half of the year.
This estimate sharply contradicts Beijing’s official narrative, suggesting that investment — especially fixed-asset investment — collapsed rather than merely softened.
Rhodium’s methodology adjusts for discrepancies in reported investment figures and broader economic activity — areas where official data appear inconsistent or incomplete.
The gap between the official and independent estimates reflects not just a statistical divergence but deeper structural issues within the Chinese economy.
Investment collapse and structural drag
Rhodium’s findings point to a dramatic contraction in fixed-asset investment — spending on factories, infrastructure, real estate, and other long-term assets — as a central factor in China’s subdued growth.
While investment showed moderate increases in early 2025, it entered negative territory by mid-year and continued to deteriorate, undermining one of the traditional pillars of China’s growth model.
Official figures show fixed-asset investment shrinking year-on-year, compounded by a collapse in property sector investment, which fell sharply and dragged down broader capital formation statistics.
These trends are emblematic of long-standing structural challenges: excess capacity in key sectors, a prolonged real estate downturn, and a reliance on credit-intensive growth that has lost traction.
The Rhodium Group report emphasises that history offers no example of an economy sustaining official-like growth rates while enduring persistent deflation, a pattern China has witnessed for multiple quarters.
This underscores the argument that official figures may overstate underlying momentum.
Deflationary pressures and weak domestic demand
While headline inflation in China showed a modest rise toward the end of the year, broader price data reflect enduring weakness in domestic demand and continued deflationary pressure at the producer level.
Producer prices have remained in decline for more than three years, signalling weak demand for goods and services throughout the economy.
Consumer spending — a key driver of growth — posted only marginal gains in late 2025, with retail sales expanding at a slower pace than earlier in the year.
Combined with shrinking investment, these trends suggest that households and firms are increasingly cautious, an indicator of broader malaise beneath the surface.
This weak domestic demand complicates the official story of “stable growth,” particularly when balanced against the outsized role exports have played in propping up activity.
While foreign trade has helped sustain the headline numbers, reliance on external demand exposes domestic vulnerabilities and raises questions about the sustainability of growth.
Transparency and data reliability concerns
Analysts and independent economists have long raised concerns about the reliability of China’s official economic data.
The Rhodium Group analysis reinforces this scepticism by highlighting methodological inconsistencies — for example, between declining fixed-asset investment and reported contributions of gross capital formation to GDP.
Critics argue that the official narrative may gloss over these gaps, particularly during periods when leaders are under pressure to maintain confidence and project economic stability.
The remarkable divergence between independent estimates and official figures has amplified calls for greater transparency and more robust statistical methodologies.
Although Chinese authorities rarely address these discrepancies publicly, the widening gap suggests a deeper disconnect between reported performance and real economic conditions.
Implications for 2026 and beyond
The Rhodium Group report does not confine its critique to 2025 alone; it also projects a subdued outlook for 2026, with growth expected to slip to between 1.0–2.5 percent, well below international projections such as those from the International Monetary Fund (IMF), which estimates around 4.5 percent growth next year.
This potential slowdown reflects not only lingering structural headwinds — weak domestic demand, investment shortfalls, and demographic pressures — but also the limited efficacy of stimulus measures that rely heavily on credit and fiscal support.
The anticipated slowdown has important implications for global markets and supply chains, given China’s significant role as both a producer and consumer in the world economy.
The broader narrative: Figures versus reality
China’s economic story in 2025 is emblematic of a broader tension between official narratives and independent assessments.
On the one hand, state statistics and global financial institutions — including the World Bank and IMF — emphasise resilience and stability, often citing policy support and external demand.
On the other hand, independent analyses such as those from Rhodium Group paint a picture of an economy constrained by fading structural drivers, deflationary pressures, and weakened investment dynamics.
The resulting divergence highlights not only different methodologies but also fundamentally different interpretations of economic health.
As China moves into 2026 and begins its next five-year planning period, the gap between these narratives will likely shape both domestic policy debates and global economic expectations.
What remains clear is that the official celebration of 5 percent growth does not fully capture the strains and uneven performance within the broader economy.
Sun Lee is a pseudonym for a writer who covers Asia and geopolitical affairs.
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