Commentary: China’s Economy Hits 5%, but the Map Is Changing

1. In 2025, two years into the second Trump administration and amid an evolving global trade environment marked by tariffs and realignments, China unexpectedly posted a robust 5% GDP growth rate. This propelled the economy's total size to over 140 trillion yuan ($19.6 trillion), signaling continued expansion despite international and domestic headwinds [para. 1].

2. However, beneath the surface, the nature of this growth has shifted considerably, reflecting diverging regional trajectories. The year’s economic narrative is about divergence rather than uniform advancement. The industrialized east has pivoted toward technological innovation as it grapples with the fallout from a real estate market collapse, central provinces are vaulting ahead as new manufacturing hubs, and the west remains stable primarily through targeted state support. This has led to a new regional characterization: “Eastern Advance, Western Stability, Southern Rise and Northern Decline” [para. 2].

3. The established economic powerhouses continued to lead but struggled with transition pains. Guangdong province, historically the national growth engine, surpassed $2 trillion in GDP — comparable to Canada or Spain — but its annual growth rate of 3.9% trailed the national average for a fifth straight year. A major driver of this slowdown was the significant downturn in real estate, with real estate investment plummeting by 23.6% in Guangdong and 21.6% in Jiangsu. This drag resulted in an 8.4% overall fall in eastern regional investment. In response, eastern coastal areas forced a transition towards "new productive forces," such as high-tech sectors. Cities like Shanghai, Beijing, and Guangdong experienced double-digit growth in information technology and software services, buoyed by artificial intelligence advances [para. 3][para. 4].

4. While the east retools, the manufacturing epicenter has moved inland. Central provinces like Anhui, now a national leader in automotive production, saw new-energy vehicle output soar by 140%. Benefiting from industrial relocation, places like Hubei and Hunan outstripped the national industrial average, further cementing the center’s new role as China’s workshop [para. 5].

5. Geographically, the most pronounced economic divergence is between the north and south. By 2025, the north’s share of national economic activity dropped to 35.1%. Deflationary pressures resulted in negative Producer Price Index (PPI) growth across nearly every province, hitting the coal- and energy-dependent north the hardest. Shanxi, for example, saw only 0.6% nominal GDP growth, far below its real growth, underscoring squeezed corporate profits as output remained steady but pricing power evaporated. Meanwhile, southern areas like the Yangtze Delta, Shanghai, and Suzhou continued to thrive, and new trillion-yuan cities like Dalian and Wenzhou emerged [para. 6][para. 7][para. 8].

6. Western China, long lagging economically, achieved stability via government-backed infrastructure investment and trade diversification. Tibet led with 7% GDP growth thanks to infrastructure pushes. More notably, trade with Belt and Road Initiative countries became central, comprising 63% of western trade, and exceeding 80% in Xinjiang and Guangxi. This trade strategy helped counter global headwinds, as national exports remained resilient and central provinces became key exporters of advanced electronics. In parallel, domestic consumption rebounded through government-supported “trade-in” schemes, softening the blow from shrinking investments [para. 9][para. 10][para. 11].

7. The fiscal landscape in 2025 reflected an urgent need for financial patchwork. Local government revenue rose 2.4%, a turnaround from 2024, yet a substantial share came from selling or leasing state assets rather than organic tax growth. This strategy provided a short-term lifeline, with provinces like Jilin and Chongqing seeing double-digit growth in non-tax revenue, but raised concerns about long-term fiscal health [para. 12][para. 13].

8. Looking ahead to 2026, China’s 5% growth rate is interpreted both as evidence of economic resilience and as proof of unresolved structural challenges. Regional disparities reveal an end to the era of across-the-board prosperity: the east is reinventing itself as a tech and service hub, the center is now the main manufacturing heartland, and the north and west are relying increasingly on natural resources and state intervention. The transition remains uneven and fraught with deflationary risks, but China’s economic landscape is decisively changing [para. 14][para. 15].