2025 Closing: High-tech manufacturing leads, 5% target achieved as scheduled, 2026 expected to have a "good start"

In 2025, China's economic "report card" was released, with the annual GDP surpassing 140 trillion yuan, a year-on-year growth of 5%, successfully achieving the growth target set by the government at the beginning of the year. Despite facing a complex external environment and domestic supply-demand contradictions, industrial production, especially in high-tech manufacturing, demonstrated strong resilience, with export data exceeding expectations, becoming a key engine for economic growth.

Data shows that the GDP growth in the fourth quarter was 4.5% year-on-year, a slight decline from the third quarter. The data for December showed significant divergence: on the supply side, continuous improvement was observed, with the value added of industrial enterprises above designated size increasing by 5.2% year-on-year, reaching a peak in the fourth quarter; however, on the demand side, pressure was evident, with the growth rate of total retail sales of consumer goods slowing to 0.9%, and fixed asset investment declining by 3.8% for the entire year, indicating that the foundation for domestic demand recovery still needs to be solidified.

Several securities firms analyzed that the investment and consumption in the fourth quarter were partly attributed to the adjustment of the pace of fiscal spending, with the effects of policies such as "trade-in" showing marginal diminishing returns in some categories. Huatai Securities pointed out that fiscal funds in the fourth quarter of last year may have "reserved strength," leaving policy space for a "good start" in the first quarter of 2026. The market generally expects that, with fiscal and monetary policies taking effect early, the economic growth target for the new year will remain within a stable range.

Investors' reactions to the latest data were relatively muted, with limited fluctuations in bond market yields. Zhongtai Securities believes that, given the "anti-involution" policy orientation and the trend of price recovery, the space for further significant declines in interest rates is limited, and market focus will shift to the implementation of structural policies in 2026 and the restoration of endogenous momentum.

Production Side: High-Tech Manufacturing Support, Supply-Side "Anti-Involution" Effect Evident

Industrial production is the main highlight of the economy in 2025. Dongwu Securities research report shows that in December, the value added of industrial enterprises above designated size nationwide increased by 5.2% year-on-year, with the value added of high-tech manufacturing increasing by 11%, more than double the overall growth rate of large-scale industry. By product, the output of industrial robots and integrated circuits increased significantly by 14.7% and 12.9%, respectively, indicating that new productive forces are increasingly supporting the economy.

It is noteworthy that changes are occurring on the supply side. Influenced by the "anti-involution" policy, some industries have begun to reduce blind expansion, and the growth rate of production capacity is becoming more standardized. Dongwu Securities pointed out that the growth rate of solar cell production capacity has dropped from 18.2% in the first half of the year to -9.7% in December. Although the growth rate of new energy vehicle production remains at 8.7%, it is also lower than the level in the first half of the year. This indicates that the industry is shifting from purely pursuing scale to pursuing quality and supply-demand balance The strong exports also provided support for production. According to Debang Securities, the value of industrial exports above designated size is expected to grow by 2.2% year-on-year in 2025, with the equipment manufacturing industries such as railways, ships, and aerospace performing particularly well.

Consumption Side: Services Outperform Goods, Effects of Trade-in Differentiated

The consumption market shows a structural characteristic of "services outperforming goods." The annual retail sales of services increased by 5.5%, significantly outperforming goods retail. Dongwu Securities analysis believes this reflects the trend of upgrading resident consumption, shifting from merely purchasing goods to a more diversified demand for services.

The "trade-in" policy showed differentiated effects towards the end of the year. The telecommunications equipment category saw a significant increase in retail sales in December, up 20.9% year-on-year, driven by new product launches and subsidies, maintaining strong growth. However, some categories that started subsidies earlier, such as home appliances and automobiles, faced demand pressure in December, with retail sales declining by 18.7% and 5% year-on-year, respectively.

In addition, there is a clear trend of consumption sinking. In December, rural social retail sales grew by 1.7%, higher than the urban growth of 0.7%. Huatai Securities pointed out that the real estate cycle has impacted the related consumption chain, with consumption of building decoration materials and furniture still at low levels.

2026 Outlook: Expected to Welcome a "Good Start"

In 2025, fixed asset investment is expected to decline by 3.8%, with real estate development investment down by 17.2%. Zhongtai Securities noted that there are signs of marginal stabilization in real estate sales, with the decline in sales value and area of commercial housing narrowing in December, and the activity level of second-hand housing transactions continuing to exceed that of new housing, indicating a shift in housing demand.

Infrastructure and manufacturing investment also showed a slowdown towards the end of the year. Huatai Securities estimated that the decline in fixed asset investment in December widened. This was mainly influenced by the pace of fiscal spending, with data showing that the year-on-year growth rate of fiscal deposits increased in December, indicating that some funds are being carried over for use in 2026. The research report believes that broad fiscal policy has reserved funds to support a "good start" for the economy this year. Despite overall investment pressure, equipment renewal investment grew against the trend. Supported by ultra-long-term special government bonds, equipment renewal investment is expected to grow by 11.8% in 2025, becoming a structural highlight on the investment side.

Looking ahead to 2026, the mainstream view in the market believes the economy is expected to welcome a "good start." Dongwu Securities believes that with the continued effects of the "trade-in" policy, the front-loading of government bond issuance, and the delayed impact of the "two 500 billion" policies being released, the economy is expected to rebound in the first quarter. Zhongtai Securities emphasized that future focus will be on the deep transformation of the economic structure, with the trend of consumption outperforming investment and technology outperforming traditional manufacturing becoming more evident.

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