“Business is very tough right now,” said Xiao Feng, who runs a small billiards hall in Beijing. His words—short, blunt, and repeated in countless conversations across the country—sum up a quiet contradiction of 2025: by many macro measures China looked resilient, but for ordinary households and small businesses the recovery often felt thin.
Two economies in one
On paper, China finished the year close to authorities’ targets. Official data and state-aligned reporting highlighted a 5%-ish growth trajectory, stronger-than-expected exports and signs that investment in advanced technologies was paying off. International institutions nudged their forecasts upward, and Beijing touted breakthroughs in domestic chip and AI development, plus surging activity in high-tech manufacturing.
Yet the everyday reality diverged. Property markets remain weak, consumer spending sputters in pockets, and service businesses from billiards halls to neighborhood shops report meagre foot traffic. That tension—vigorous headline indicators versus soft living-room wallets—is the center of the story.
What's propping up the numbers
Several durable sources of strength have helped mask deeper cracks. First: exports. Even as global demand wobbled in places, China’s trade sector held up better than many expected. Second: targeted policy and corporate push into frontier industries—electric vehicles, semiconductors, large-scale data centers, and AI—generated new investment and jobs in urban tech clusters.
China’s leap in AI and related fields shows up in surprising ways. Locally focused R&D and deployment have meant AI systems are not just a research novelty but a productivity tool across logistics, manufacturing and services. That technological momentum is part of why foreign firms still place big bets inside China, shifting some of their global R&D to Shanghai and Beijing.
If you want a concrete taste of the tech noise: recent launches of new AI imaging and productivity tools from global firms have accelerated enterprise adoption in China, a dynamic mirrored by developments like Microsoft’s MAI-Image-1 and the push for agentic features in search and services exemplified by Google’s AI Mode. Those platforms—inside and outside China—help nudge automation and digital upgrades across industries.
The stubborn weight of property
But there’s the weight pulling everything back: property. Decades of rapid building left a huge inventory and a complex web of leveraged developers, local governments reliant on land sales, and households with mortgages tied to speculative price expectations. The slump is not merely about prices; it’s about confidence. When buyers hesitate and developers delay projects, contractors, furniture makers, local merchants and countless salaried workers feel the pinch.
Analysts now warn the fallout could be long-lived. Some deep-dive economists see the property malaise stretching into the end of the decade, suggesting only a slow thaw unless policy tackles the problem more directly and with sustained fiscal backing. That’s the scenario sketched in thinkpieces and private-sector analyses that worry about unfinished projects, weak credit flow and households sitting on unsold units.
Adding to the unease, an independent think tank estimate published late in the year surprised many: it suggested China’s full-year growth could be well below official claims—closer to 2–3%—if one adjusts for reporting differences and underlying activity shortfalls. The gap between official figures and some independent estimates has introduced fresh uncertainty into both business planning and public sentiment.
Policy responses and political context
Beijing has not been idle. Authorities rolled out pro-consumption measures—relending facilities aimed at services and elder care, consumer-trade programs financed by long-term bonds, and incentives to push upgrades in manufacturing. These moves are intended to rebalance growth toward domestic demand while maintaining a safety net for key sectors.
There’s also a diplomatic subplot: trade thawing with the United States following high-level détente reduced the immediate risk of a damaging bilateral rupture, giving Chinese exporters and manufacturers room to breathe. Still, structural challenges—demographics, local government finances, and the overhang of real-estate debt—remain.
What this feels like on the ground
For people like Xiao Feng, macro policy is distant. What matters is whether customers show up, whether rents can be paid, whether a spouse’s steady salary can carry a household through months of low income. For large firms and city-regions, the narrative is different: innovation, foreign R&D centers and niche export strength are visible wins.
That duality matters because it shapes politics and markets. Resilience that rests on concentrated high-tech success and external demand leaves broad swathes of the economy exposed. If the property correction lingers, consumer confidence may keep suffering even while headline growth holds.
China’s 2025 was therefore a year of contrasts: clear signs of industrial and technological reinvention, yet unresolved legacy problems that could drag growth lower over time. How policymakers stitch those threads together—balancing targeted support for innovation with sustained, credible help for property markets and household incomes—will determine whether the next few years feel like steady repair or another stretch of fragile growth.