China's Economic Report Card to Set Global Market Tone for 2026
Investors brace for Q4 GDP data, which is expected to confirm a slowdown in the world's second-largest economy amid a property slump and weak consumer spending.
Global investors are on high alert as China prepares to release a batch of key economic data, including its fourth-quarter and full-year gross domestic product figures for 2025. The data, scheduled for release on Monday, will offer the most comprehensive snapshot to date of the health of the world's second-largest economy and set the tone for global markets in the early weeks of 2026.
Economists widely expect the figures to confirm a challenging end to 2025 for China, with a consensus forecast for fourth-quarter GDP growth to slow to between 4.4% and 4.5% year-on-year. This would mark the weakest quarterly growth in nearly three years, underscoring the persistent headwinds from a prolonged property market crisis and sluggish domestic demand. For the full year, GDP is expected to come in around 4.9%, which would meet Beijing's official target but still represents a significant cooling from the nation's pre-pandemic growth rates.
A key area of concern will be the December retail sales figures, a crucial gauge of consumer sentiment. Projections point to a meager 1.2% year-on-year increase, a sharp deceleration from previous months that highlights the struggle to boost household spending in the face of economic uncertainty and deflationary pressures. This weakness at the cash register stands in contrast to the surprising resilience of the country's industrial sector.
In a rare bright spot, China's official manufacturing Purchasing Managers' Index (PMI) edged up to 50.1 in December, indicating the first expansion in factory activity in eight months. This uptick has been largely supported by resilient export performance, which has helped to offset some of the domestic gloom. Industrial production for the full year is expected to have grown by a respectable 5.9%.
With the economic picture looking increasingly uneven, all eyes will be on Beijing for signs of further policy support. While policymakers have introduced a series of targeted measures to stabilize the economy, they have so far refrained from launching the kind of large-scale stimulus seen in past downturns. Analysts expect this cautious approach to continue, with the government likely to favor targeted support for strategic industries and measures to boost consumer confidence over a monetary bazooka.
Looking ahead, economists are forecasting that China's GDP growth will moderate further in 2026, with most estimates falling in the 4.5% to 4.6% range. The country's ability to navigate its structural challenges, including the transition away from a real estate-driven growth model and an aging population, will be critical in determining its long-term economic trajectory. The outcome of the upcoming data release will not only influence investor sentiment towards Chinese equities but will also have significant ripple effects across the global economy, impacting everything from commodity prices to the supply chains of multinational corporations.