Macroeconomic growth analysis and its core framework are typically conducted by examining the percentage-point contributions of consumption, investment, and net exports to GDP growth. This decomposition approach helps reveal the underlying drivers and structural characteristics of economic growth. By comparing structural changes across different periods, we can identify deeper trends associated with economic transformation. Against the backdrop of ongoing and intensifying deglobalization in recent years, a key question arises: what are the fundamental logic and essential factors in China’s economic growth?
On this issue, many interpretations appear plausible on the surface, yet most fail to capture the true essentials. This, in turn, has distracted the country’s policy focus and undermined the stability of China’s economic growth. Unlike the prevailing studies and viewpoints, ANBOUND’s founder Kung Chan adopts a cross-cycle comparative approach that strips out short-term disturbance factors. Using economic data from 2019 and 2025 as comparative samples, he precisely identifies exports as the structural driver behind China’s economic growth. Notably, 2019 is chosen as the benchmark year primarily to exclude the short-term economic shocks caused by the pandemic since 2020, thereby restoring the economy’s normal growth pattern and making the comparison more meaningful and informative.
Looking at exports, under mounting geopolitical pressure, China’s net exports have risen markedly, demonstrating unexpected resilience. The 2025 data present a picture fundamentally different from that of 2019. According to the country’s National Bureau of Statistics (NBS), China’s GDP in 2025 surpassed RMB 140 trillion for the first time, reaching RMB 14.01879 trillion, with a year-on-year growth rate of 5.0% in constant prices. In 2019, GDP totaled RMB 10.05872 trillion, up 6.1% year-on-year. Although the difference in growth rates between the two years is only 1.1 percentage points, it reflects a fundamental shift in the contributions of the three drivers of growth.
From the perspective of net exports, their contribution to GDP growth reached 1.3 percentage points in 2025, compared with just 0.7 percentage points in 2019, an increase of nearly double. This set of figures clearly indicates that China’s economic growth in 2025 has become highly dependent on export support. If the contribution of net exports were excluded, economic growth in 2025 would fall directly to 3.7%, rather than 5.0%, an indication that exports are the core lever of China’s economic expansion. Even more noteworthy is that this supporting role has been achieved amid sustained tensions in U.S.-China geopolitical relations and the ongoing restructuring of global supply chains, further confirming that the resilience of China’s export sector far exceeds market expectations.
Many believe that the U.S.-China trade war has significantly weakened China’s exports to the U.S., but the actual data reveal a more complex picture. Data released by China’s General Administration of Customs in January 2026 show that direct U.S.-China trade in 2025 amounted to RMB 4.01 trillion, accounting for 8.8$ of China’s total imports and exports. This represents a sharp decline from the roughly 15% t share seen in previous years. However, this does not mean that the overall scale of China’s exports to the U.S. has contracted. Rather, the lost share has been offset through indirect trade channels.
As a result of the high tariffs imposed by the U.S., Chinese products have increasingly entered the American market via transshipment hubs such as ASEAN countries and Mexico, which formed stable indirect export chains. According to a 2026 global value chain research report released by the United Nations Conference on Trade and Development (UNCTAD), U.S. imports from ASEAN countries and Mexico increased by about 40% in 2025 compared with 2020, while imports of intermediate goods and components from China by these economies rose by 35% over the same period.
In particular, China’s exports of semiconductor packaging materials to Vietnam increased by 45% in 2025, while exports of automotive components to Mexico surged by 47%. After undergoing simple processing in these countries, the products entered the U.S. market under the labels “Made in Vietnam” or “Made in Mexico”, driving a sharp rise in U.S. imports from ASEAN countries and Mexico. Supply chain model estimates suggest that, when indirect trade is taken into account, the effective share of U.S.-China trade in 2025 remained at the historical norm of around 15%. This indicates that the U.S. remains a key destination for China’s exports and that the global supporting capacity of its manufacturing sector has not been weakened by geopolitical factors.
As for consumption, China has long since achieved a structural shift from "optional consumption" to "essential consumption". All in all, consumption’s contribution to its economic growth has declined noticeably. Data show that in 2025, consumption contributed 2.6 percentage points to GDP growth, down from 3.5 percentage points in 2019, a decline of 0.9 percentage points. This clearly reflects a pronounced weakening in consumption momentum.
Even more concerning is that the underlying nature of consumption in the two years differs fundamentally. Consumption in 2019 included a substantial share of luxury spending, service-oriented consumption, and certain wasteful or discretionary expenditures, with non-essential consumption accounting for a relatively high proportion. By contrast, the consumption structure in 2025 has contracted sharply, where luxury consumption declined by more than 30% year-on-year, and the share of non-essential service consumption such as dining, culture, and tourism continued to fall. Current consumption data largely reflect basic, need-driven spending, concentrated in essential areas such as food, daily necessities, and healthcare. According to Bain & Company, growth in China’s domestic luxury goods market slowed from 26% in 2019 to 5% in 2025, the lowest level in nearly two decades.
This indicates that consumption in 2025 has fallen to a “bare-minimum” level. Any further decline would push households into outright belt-tightening, and weaken consumption’s role as the stabilizing anchor of economic growth. Data from the NBS show that in 2025, final consumption expenditure contributed 52.0% to economic growth. Although this remains the largest share among the three drivers, it represents a sharp drop from 76.2% in 2019, underscoring the significant erosion in consumption’s capacity to drive economic growth.
The performance of investment is more surprising, as China’s investment direction has not undergone any major adjustment. In 2025, investment contributed 1.1 percentage points to GDP growth, compared with 1.9 percentage points in 2019, a difference of 0.8 percentage points. As a result, many observers believe that a sharp decline in investment is the main cause of economic weakness. From an aggregate perspective, declining investment has indeed had an impact on the economy, but it is neither the decisive factor nor the sole driving force.
Given that there is no dramatic difference in the overall scale of investment, the issue must lie in the structure of investment. This implies a decline in efficiency, with investment failing to effectively drive economic growth. In other words, the real problem is not the size of investment, but structural imbalances and falling efficiency. This is the main reason for the decoupling between investment and economic growth. According to fixed-asset investment data released by the NBS in January 2026, total nationwide fixed-asset investment (excluding rural households) in 2025 amounted to RMB 48.5186 trillion, down 3.8% year-on-year. Within this, private investment fell by 6.4% and foreign investment by 13.8%, reflecting weak investment appetite among market participants.
From a structural perspective, investment allocation is severely uneven. Investment in the secondary sector increased by 2.5%, with investment in utilities such as electricity and heat rising by 9.1% and investment in automobile manufacturing up 11.7%. By contrast, investment in pharmaceutical manufacturing fell by 13.5%, and investment in electrical machinery manufacturing declined by 10.3%. Investment in the tertiary sector dropped by 7.4%, with investment in education, health, and social services down by 8.3% and 12.3% respectively, indicating a serious shortfall in investment in areas related to livelihoods and innovation. Large amounts of capital are concentrated in low-efficiency, asset-heavy traditional sectors, as well as in superficial, hype-driven “hot” sectors with numerous labels but limited substance. These investments struggle to generate effective capacity, largely unable to create jobs or raise household incomes, and therefore have little impact on driving economic growth. If this structural imbalance is not corrected, even an expansion in the overall scale of investment in the future is unlikely to provide positive momentum for economic growth and may instead exacerbate the misallocation of resources.
Overall, China’s current economic growth’s three drivers present a pattern of strong exports, weak consumption, and low-efficient investment.
What is particularly concerning is the decoupling between investment and economic growth. A decline in investment does indeed affect economic growth and can spill over into consumption. For example, a slowdown in infrastructure investment can reduce employment and income for migrant workers, thereby constraining consumption capacity. However, the more serious issue lies in the disconnection between investment and growth itself. This decoupling deserves close attention from policymakers going forward. If it is not addressed, relying solely on incremental investment will be unable to reverse the current weakness in growth. On the consumption side, factors such as unstable household income expectations, a rising propensity to save, and high levels of household debt make a strong rebound unlikely in the short term. Under these circumstances, maintaining the current level of necessity-driven consumption and avoiding further decline would already be a relatively positive outcome.
Taken together, exports remain the most important driving force behind China’s current economic growth. They constitute a critical pillar that has enabled the economy to withstand pressure. This role should not be simplistically interpreted as “reliance on external demand” but rather understood as the natural outcome of China’s deep participation in the global division of labor and its effective use of comparative advantages.
For China, sustaining economic growth will require not only reinforcing the resilience of exports, i.e., by continuously optimizing their structure and expanding into diversified markets, but also taking targeted measures to address inefficient investment and the growing decoupling between investment and economic growth. Only in this way can the three drivers return to a balanced and coordinated contribution, making economic growth more sustainable. In other words, exports concern leveraging China’s position in the global economy, while consumption involves reducing household debt burdens and enhancing or creating employment, and finally, investment focuses on resolving the decoupling between investment and economic growth.
In reality, China is facing a dual decoupling, both externally and internally. The causes are diverse, including strategic and security considerations. Regardless, the resilience of China’s economy will depend on the overall strength of the national economic system, rather than any single factor. Therefore, controlling investment decoupling and correcting structural imbalances is likely to become an unavoidable policy choice for the country.
Final analysis conclusion:
A cross-cycle comparison reveals the underlying logic driving China’s economic growth. While a decline in investment does affect economic growth and can spill over into consumption, the bigger issue is the decoupling between investment and growth, and relying solely on increased investment cannot reverse the current weakness. In terms of consumption, maintaining stability would already be a positive outcome. The most important factor remains exports, which continue to serve as a critical pillar supporting China’s economic resilience.
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Xia Ri is an Industry Researcher at ANBOUND, an independent think tank.
