China fourth-quarter growth slows to 4.5%, weakest in nearly three years

China’s economic growth slowed to its weakest pace in nearly three years in the fourth quarter as domestic demand softened, though full-year growth matched Beijing’s target despite growing trade frictions with the U.S. and a prolonged real estate slump.

Gross domestic product grew 4.5% in the October-to-December period, data from the National Statistics Bureau showed Monday. That marked a slowdown from 4.8% in the third quarter and was the weakest reading since the first quarter of 2023, when growth also came in at 4.5%.

Full-year economic output came in at 5%, meeting the official target of around 5%.

Separate December data showed domestic consumption weakened and the investment decline steepened, while manufacturing improved.

Retail sales, a key gauge of consumption, grew 0.9% in December from a year earlier, missing economists’ forecast for 1.2% growth and slowing from 1.3% in the prior month.

Industrial output climbed 5.2% in December, topping expectations for a 5% growth and up from 4.8% in the previous month.

Fixed-asset investment, which includes real estate, contracted 3.8% last year, worse than economists’ forecast for a 3% drop in a Reuters poll.

The urban unemployment rate remained unchanged at 5.1% in December.

The world’s second-largest economy has shown resilience in 2025, largely helped by lower-than-expected tariff rates and exporters’ push to diversify away from the U.S., allowing its policymakers to hold off on launching large-scale stimulus.

China reported a record trade surplus of nearly $1.2 trillion last year, driven by surging exports to non-U.S. markets as manufacturers redirected shipments to avoid higher U.S. tariffs.

The anticipated drag from front-loaded shipments, tighter transshipment controls and currency appreciation has been limited, said Tommy Xie, managing director of OCBC Bank. Xie expects China’s exports to grow around 3% in 2026.

Economists have called for structural economic reforms to shift toward boosting domestic consumption and reducing reliance on exports and investment, warning that the current growth model poses long-term risks.

“Plunging investment and weak household consumption have made the Chinese economy increasingly reliant on exports to power growth, a situation that is untenable for China as well as the world economy,” said Eswar Prasad, a professor of trade policy and economics at Cornell University.

Beijing has sought to rein in excess industrial capacity and curb aggressive price wars. Consumer inflation accelerated to 0.8% in December, the fastest pace in nearly three years, while producer prices dropped 1.9%.

Still, China’s GDP deflator, the broadest measure of prices across goods and services, has remained negative since 2023 and is expected to fall by 0.5% in 2026 in the longest streak on record, according to Larry Hu, chief China economist at…