The rebound is mostly being driven by external demand. Exports have done well and government fiscal support coming earlier in the year than usual have helped. The bigwig policy makers in Beijing and your provincial capital appear to be leaning on these levers to aid growth, even as domestic consumption remains subdued and confidence fragile.  

As usual with announcements like this, recovery isn’t even. While headline growth is improving, underlying demand dynamics tell a more cautious story. Consumer spending isn’t yet where economists would want it to be. That’s likely a reflection of continued worry over the property downturn mixed with broader uncertainty around the economy. Investment-wise, the story also remains unflattering. All of this keeps the economy hooked on exports, with domestic demand still waiting in the wings. 

Energy prices are also at play here, and in a way that fluffs the numbers a little. Costs are rising. And as they rise nominal growth gets a boost – but it’s more inflation than real momentum. Strip out that price effect and the recovery starts to look a lot less convincing. 

The Dao view: Chinese Q1 2026 economy growth isn’t something to clap for yet

Looking ahead, momentum may prove difficult to sustain. Export strength is already showing signs of softening towards the end of the quarter, while policymakers face the ongoing challenge of boosting domestic demand without resorting to large-scale stimulus. 

The fancy figures of this first quarter look like it’ll fit into an all too Chinese economic cycle: stabilisation coming from policy support and external demand, but with underlying structural weaknesses – domestic consumption, we’re looking at you – still unresolved. 

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The number might sound familiar – last year’s goal was a solid 5% – but in historical terms it reflects a clear shift from the soaring double-digit growth numbers that powered China’s economic rise.  

It’s a message that the era of breakneck growth is over. Stability now matters more than speed. And it’s a message that comes from the top dogs in Beijing… 

Officials say the focus is now on shifting toward what they call ‘high-quality growth’. That means boosting domestic consumption, investing heavily in advanced manufacturing and emerging technologies, and reducing reliance on property development as the economy’s main growth engine.   

The pivot comes as China faces a tougher economic landscape. The property sector – once responsible for huge swathes of China’s growth – remains in a prolonged slump. Consumer confidence is weak. Youth unemployment is high. Demographic pressures continue to act like a weight on the neck of recovery.   

The gov. is also trying to steady the ship of the labour market. Beijing has set a target of creating around 12 million new urban jobs this year and aims to keep the urban unemployment rate at roughly 5.5%.  

China set low GDP growth target: Dao’s take

Alongside these economic targets, policymakers signalled continued support for strategic industries like AI, semiconductors and advanced manufacturing, areas Beijing sees as crucial for the country’s next phase of development.

So then, is China abandoning growth? No, it’s redefining it. The world’s second-largest economy is still expanding – and still faster than most – but the tempo is changing. For those of you wondering what that means for the future of business in the country. It’s safe to say the gold rush days are gone. Don’t mourn the past. The future still offers growth, just on stronger foundations. 

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Under Starbucks’ new structure, Boyu will take up to a 60 % stake in a newly formed joint venture, managing roughly 8,000 existing stores. Starbucks retains a 40% stake and continues to own and license the Starbucks brand and intellectual property in China. Starbucks says this deal places the total value of its China retail business (sale proceeds plus retained equity plus expected licence income) at over US $13 billion. 

The timing is notable. The Seattle-based chain’s China market share has slid sharply in recent years from around 34% in 2019 to roughly 14% last year, all amid fierce pressure from local challengers like Luckin Coffee and Cotti Coffee. 

Starbucks CEO Brian Niccol said the partnership with Boyu is designed to marry Starbucks’ global brand and coffee expertise with Boyu’s deep local market insight, particularly in China’s lower‐tier cities. Starbucks has big plans for their future, too: aims include growing their store count from the current 8,000 to more than 20,000 over time. 

Analysts interpret this localisation deal less as an exit and more as a local execution pivot. It mirrors similar consumer-brand localisation strategies in China’s mature market. This month we’ve seen a deal struck around Burger King’s China business. In 2017, McDonald’s sold 80% of its China business on similar motivations.  

It’s a well-trodden path: from Yum China’s spin-off and Carrefour’s sale to Suning, to Costa Coffee’s handover to Cofco Coca-Cola – each marking how foreign consumer giants have traded ownership for local agility in China’s mature market. 

Here’s why localisation works: The China market is no longer an open frontier but a finely balanced contest of price, speed, and local relevance. With low-cost rivals squeezing margins and the market demanding nimble, relationship-driven operations, foreign headquarters can’t move fast enough. Working with local partners like Boyu gives companies the on-the-ground levers it needs: real-estate access, regulatory fluency, and financing agility. It also does it while keeping the global brand intact. The recalibration then is pragmatic: control less, but adapt more, and let local expertise drive the next wave of growth. 

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If the 14^th Plan (2021–2025) was about high-quality growth, this, the 15^th, is about strategic endurance. Beijing’s priorities fall into three pillars: technological self-reliance, household consumption, and system security. Taken together, they mark a clear pivot from chasing speed to building stability.

The top priority is technology. Semiconductors, AI, robotics and quantum computing are now national security assets, not just commercial sectors. Beijing wants ‘major breakthroughs’ in hard tech to reduce its exposure to western export controls. The tone is existential. Technology leadership is now being framed as survival.

Alongside that is a commitment to domestic spending. Party officials have promised to raise household consumption as a share of GDP – a metric currently stuck at around 40%, far below western levels. The logic behind the policy is blunt: without stronger household demand, China can’t sustain that much-touted 4–5% growth. Expect targeted welfare reform, wage support and city-level consumption drives to follow.

The third pillar, security and resilience, threads through everything. Economic planning and national security are being folded into one document. The aim is to build what planners call ‘a modern industrial system’ that can absorb external shocks, from chip bans to shipping disruptions.

For brands and investors, this new plan signals a more defensive China – one that prizes reliability over flashy growth data. Domestic manufacturing and consumption will sit at the heart of policy, while politically risky sectors may see tighter scrutiny. Essentially, expect a strengthened high-tech manufacturing industry and drives to boost consumer spending, but don’t be surprised to see government eyes watching sectors that could be deemed sensitive or unstable.

In short: the next five years will be less about the breakneck expansion we’ve known China for of late, and more about insulation. The country’s growth model is evolving from engine to shock absorber: slower, steadier, and more self-contained. But that doesn’t mean China’s dropping its ambition to shape the next era of the global economy.

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The Shanghai reforms are wide in scope, encompassing everything from healthcare to imported artworks – the latter of which will see deposit requirements stripped. The broadest changes are happening by district, or free-trade zone, with each region focusing on a different area of business. In total, it will add eight districts and five national-level development zones to six districts that were piloted in August.   

It’s a lot to get your head around, but here’s what it means on the ground: finance sees big changes. Short-term international lending of RMB will be made easier, and multinational cash pools will see better integration of local and foreign currency. To snare the best talent from abroad, recognition will be given to a host of foreign professional qualifications and special cases will be granted longer durations of stay on their visas.  

Private hospitals will now be able to have entirely foreign ownership, and qualifying overseas legal practices will be allowed to apply for financial licences. It will be easier for performance agencies representing foreign talent to set up shows in the city. Had enough yet? We’ll wrap it up after this: Scientists will be incentivised by profit-sharing schemes, and the sending of research and financial data will be streamlined. Full details of the changes can be found in Chinese here.

There’s much to be said about this. Last month Dior was fined for improper transfer of data. Much of what happened was the result of unclear guidelines on what they could and couldn’t do. No doubt their lawyers will be picking over the fine print on the data-sending changes. This kind of reform reminds us that Shanghai still wants to be the shopfront of China: cosmopolitan, ambitious and confident. The question now is whether openness on paper can translate into opportunity on the ground. 

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In response to the stimulus, over 3,000 stocks surged in the RMB A-share markets. Shanghai’s SSE Composite Index was up 0.8% at closing, while Shenzhen’s SZSE Component Index was up 0.22%.

• #央行宣布降准降息 Central bank announces rate and RRR cut: 380 million views on Weibo, ranking number 1 on the Hot Search list, 4.58 million views on Rednote, ranking number 2 on the Hot Topic list
• #A股三大指数集体高开 all three indices of A-share open high: 3.61 million views on Rednote, ranking number 9 on the Hot Topic list

Most netizens are discussing whether the stimulus would affect mortgages or just the Housing Provident Fund. Others seem to believe it’s to boost the consumer market. Much of the discussion is directed at the effect the stimulus has had on the stock market. Global pundits are mostly interpreting it as a move to shore up against tariffs from the Trump administration, especially ahead of the “ice-breaker trade talks” this weekend in Geneva.

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As we reach the end of the first month of 2025, it is important to examine the progress made in China regarding electric vehicles and smart driving, and possibly observe more trends that will emerge as the Chinese Year of the Snake approaches. This is in addition to the start of Trump’s second term as President of the United States, leaving the future of global trade and competition in limbo.

Battle of the China market

In the first month of 2025, two EV-related topics continue to pop up on Chinese social media, Tesla and Lei Jun, founder and CEO of Xiaomi. The recently launched Model Y from the American EV maker and Lei’s comment on the SUV made it to the Hot Search list on Weibo, China’s Twitter equivalent. However, stores have reported that the new Model Y has received waves of orders even though the displays are not yet on the showroom floor. Interestingly, Lei’s statement, “Apart from Tesla, all electric-only vehicles are losing money” also reached number 40 on the Hot Search list on Weibo with 6.36 million views.

Tesla and Xiaomi are both tech-centric EV makers, but the resemblance seems to end there. Tesla has been referred to in the West almost exclusively as the brand of its deeply controversial owner, Elon Musk, in recent days, but in China, it remains focused on the merit of its product. Xiaomi, on the other hand is the opposite as it is known for its household appliances and smart home ecosystem in the West, but its founder and CEO is as much if not more on the mind of Chinese netizens as the brand itself or its EVs.

On Douyin, TikTok’s Chinese sister app, Lei reached number 3 on the list of ranking accounts that gained the most following on the platform with over 2.5 million new followers in 2024. The only entrepreneur in the top 50, Lei even beat Walking with Hui, star livestreamer Dong Yuhui’s new channel after leaving Oriental Selection.

Imports, exports

Lei Jun made the news again on 21 January by simply reposting the December electric vehicle sales ranking, as it shows that the SU7 sedan from Xiaomi had surpassed Tesla’s Model 3, with 25,815 to 21,046 units. Other Chinese EVs are also dominating the Chinese market in other categories or segments, such as Huawei and Seres’s AITO M9, which topped the list of cars priced in the 500,000 RMB (68,750.26 USD) range with its 150,000 units delivered. Conventional luxury car brands are now facing stiff competition in China.

With China-made cars from domestic and international brands like Seres, Xiaomi and Tesla, imported vehicles saw a huge decline in the past year. In 2024, only 700,000 vehicles, electric or petrol, were imported, dropping 12% year-on-year (YoY), marking the third consecutive year of decline. Meanwhile, sales of vehicles in the EU also saw a 5.9% YoY drop in 2024. This is partly due to Germany and other countries halting the subsidy of EVs in December 2023.

With Li Auto opening its first overseas R&D centre in Munich, Germany, on 17 January, and Mercedes-Benz Group CEO Ola Källenius’ calls on the EU to push for more Chinese EV brands to build manufacturing facilities in the EU and negotiating with Beijing over ending the tariffs on Chinese EVs, there might be more room for these domestic brands to grow as the Chinese market becomes increasingly crowded.

What’s next for Chinese EVs?

Källenius’ opinion might also stem from concerns over a potential trade dispute between the United States, China and the EU as Donald Trump begins his second term in the White House, with plans on inflicting tariffs on German cars and a 10% tariff on Chinese imports from 1 February.

More than just hardware vehicles, Chinese companies are also growing rapidly in the realm of smart self-driving or assisted-driving systems. The turn of the year saw two Chinese companies successfully going public at the Hong Kong Stock Exchange (HKEX), MINIEYE on 27 December and Saimo on 15 January. With Huawei and other tech companies aiming at this battleground, it calls to question how much of a difference Tesla’s Full Self-Drive is going to make when it rolls out in China in the first quarter of 2025.

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The results of Country Garden’s first day back on the HKEX far exceeded market expectations. In combination with recent policy changes, the real estate sector received a boost from the market, both in Hong Kong and Mainland China. Vanke was up 7.45%, CCCG Real Estate grew 5.32%, and Gemdale Corporation saw a 5.19% increase in its share prices. In fact, property stocks had more transactions in half a day on 21 January compared to the entire day the day before.

In April 2024, Country Garden’s stock was suspended pending its financial results from 2023. It also faced a delayed liquidation hearing in Hong Kong, filed by creditor Ever Creditor Limited. However, Country Garden announced its debt restructuring agreement with 7 banks on 9 January, as well as releasing its 2023 annual report and H1 2024 report on 14 January. Country Garden’s total revenue in 2023 was 401 billion RMB (54.82 USD), with a loss of 200.96 billion RMB (27.47 billion USD). In the first half of 2024, the company’s loss was reduced to 10.8 billion RMB (1.48 billion USD) against 102.1 billion RMB (13.96 billion USD) in revenue.

The uplift in business gave Country Garden and its investors the confidence to face the liquidation hearing and restart trading. With the Chinese government pledging policy changes to help the ailing real estate sector, Country Garden might just have a shot at reviving itself in 2025.

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The first thing that happened, of course, is that the yuan, or RMB fell sharply against the dollar. According to the South China Morning Post, the offshore RMB trading on Wednesday had at one point dropped more than 900 basis points and fallen below 7.19 to the dollar before recovering slightly. Stock markets also dropped despite global markets soaring. This is, of course, not only caused by the uncertainty of the global economy but also by the 60% tariff that Trump has threatened against Chinese imports.

Smaller manufacturers in China, especially, will bear the brunt of the possible tariffs Trump has threatened. The United States is the top destination for exports from China and imports more than 400 billion USD worth of goods from the country. It has been estimated that should an additional 60% tariff be put in place; China’s GDP growth might be down 2.5 percentage points in the next year.

This is likely the reason the long-awaited fiscal stimulus has only started being formulated as lawmakers gather for a week-long session on Monday, despite being expected since the previous raft of stimulus was announced in September. It has long been speculated that a Trump win could prompt a 10% to 20% larger stimulus package by the Chinese government with the prospect of another trade war. The National People’s Congress standing committee meeting this week will decide just how much the package would be. Although pundits are not confident it would be enough, it seems China is still aiming for a 5% GDP growth target this year.

Despite the government’s stance of consistency between US-China relations, it is likely Trump’s presidency will mean more rivalry between the two countries, in trade and in other fields.

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Starting in Guangzhou on 29 September, then Shenzhen, both in Guangdong province in Southern China, followed by Shanghai and then Beijing on 30 September, all four “tier-1” cities announced their new policies before the “golden week” holidays. Guangzhou announced the most extensive policy changes and became the first tier-1 city to lift all home purchasing restrictions. Individuals and families with hukou in or outside Guangzhou will be able to buy a home, regardless of how many homes they own. Shenzhen and Shanghai have fewer radical changes in their restriction policy.

Beijing is the last one to lift some of its restrictions. Changes include lowering the years of paying social security and income tax in Beijing before a family without Beijing hukou can buy a home from 5 to 3, with special talents being able to purchase a home after paying income tax and social security for 1 year. The down payment proportion has also come down from 20% to 15% for first homes, and from 35% (within 5th Ring Road) and 30% (outside 5th Ring Road) to 20%.

Other major cities have followed suit, from provincial capitals like Wuhan to other populous cities like Wuxi, past restrictions have loosened, and consumer sentiment is much warmer. Nanjing, Jiangsu reported stabilisation and growth in home buying in the last week of September and even the stocks of property developers are surging, due to both the stimulus from the central bank, the Politburo meeting and the local policies. As with the stock market boom, it needs further observation to see if the property policies are effective and sustainable.

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