In 2025, as the year comes to a close, questions arise about the state of China’s economy and what lies ahead for the next year. While the Central Economic Work Conference in Beijing attempts to downplay issues, experts indicate a serious leakage of woes.
Approaching the end of the year, rumors on the Chinese internet are circulating about businesses closing down, foreign investments withdrawing, and people losing their jobs.
In Beijing, many bloggers are sharing videos saying, “Busy Beijing suddenly has no people. The visible gloom in this national political and economic center is undeniable.”
On December 11, a blogger captured the scene at Beijing Railway Station and posted a video online, narrating, “The visible desolation. After so many years in Beijing, this is the first time I’ve seen such a sight, even during the pandemic.”
Dongguan in Guangdong is a showcase city for southern Chinese manufacturing. Recently, friends from Dongguan have told Epoch Times reporters that due to the impact of the US-China trade war, many enterprises have moved overseas, leaving the local area desolate, a stark contrast to its past prosperity.
Even local enterprises are indirectly laying off employees through various means such as rotation, extended leaves, and encouraging resignations.
These are just scattered glimpses of desolation from south to north.
Data from November shows that China’s industrial, consumption, and fixed asset investment have all fallen short of expectations.
According to the latest data released by the National Bureau of Statistics on December 15, industrial output nationwide grew by 4.8% year-on-year, the slowest growth rate since August 2024, lower than the 4.9% in October. This growth rate is also below the Reuters survey forecast of 5.0%.
Retail sales, a measure of consumption, grew by 1.3%, the slowest pace since December 2022 (when China ended pandemic restrictions), far below October’s 2.9% and the earlier forecast of 2.8%. Up to November, retail sales have seen six consecutive months of slowing year-on-year growth, the longest period of slowdown since 2020.
The subsidy program for consumer goods introduced last year has pre-emptively drained some consumer demand, making it difficult to sustain growth momentum. The weakening effect of the subsidy for replacing old items was particularly evident in November’s expenditure data. Appliance sales decreased by 19% year-on-year, the worst performance since early 2020.
Fixed asset investment declined by 2.6% in the first 11 months of this year, a larger drop than the 1.7% during January-October, expected to mark the first annual decline since there are records from 1998.
Real estate investment from January to November declined by 15.9% year-on-year, a greater decrease than the 14.7% from January to October; the average housing prices in 70 major cities dropped by 2.8% in November compared to a 2.6% decrease in October. Nationwide new commercial housing sales area was 787.02 million square meters, down by 7.8% annually; the sales of new commercial housing totaled 751.3 billion yuan (RMB), a decrease of 11.1%.
The Central Economic Work Conference in Beijing from December 10 to 11 summarized this year’s situations, analyzed the economic situation, and deployed economic work for 2026. Officially, it was stated that in 2025, “old problems and new challenges still exist,” but it was asserted that “economic pressures are moving forward,” mostly as “issues of development and transformation, which can be resolved through efforts,” and that “the long-term positive conditions and basic trends of the economy have not changed.”
Wang Guochen, a research assistant at the China Economic Research Institute, told Epoch Times that the official statement downplays the issue, but in reality, the situation has worsened. The Beijing authorities may believe that although the situation is deteriorating, the risks are controllable due to high-pressure stability maintenance. This leads them to think the situation is still manageable despite economic conditions worsening.
Qiu Wanjun, a finance and finance professor at Northeastern University in Boston, United States, also told Epoch Times that the Chinese authorities are trying to conceal severe problems. Many policies introduced last year and this year have had little to no effect. The Chinese regime adopts a planned economy approach, lacking the vitality and flexibility of a market economy.
Beijing has proposed that the primary task for next year is to “focus on domestic demand and build a strong domestic market,” optimizing the implementation of the “two new” policies and implementing the “two heavy” projects effectively.
Since last year, China has promoted the so-called “two heavy and two new” initiatives, where “two heavy” refers to the implementation of major national strategic projects and the construction of security capabilities in key areas (issuing special long-term bonds to support them), while “two new” refers to driving a new round of large-scale equipment upgrades and the replacement of consumer goods with new ones.
Wang Guochen pointed out that the effects of the previous policies regarding the replacement of consumer goods and the large-scale equipment upgrades are wearing off since households and businesses already have new appliances. Therefore, the effectiveness of next year’s policies is likely to diminish.
Officials have mentioned optimizing the management of the use of local government special bonds, effectively stimulating private investment.
Qiu Wanjun believes that for the past few years, China has been aiming to maintain a 5% economic growth rate. To achieve this, they have employed various government expenditures, stimulus policies, unprecedented deficit budgets, and extensive borrowing. However, relying on borrowing to drive economic growth is becoming less effective over time.
In 2024, China’s general public budget revenue was about 21.97 trillion yuan, while expenditures were around 28.46 trillion yuan, resulting in a substantial deficit.
Wang Guochen stated that when issuing bonds, there must be entities willing to purchase them, but the central bank is reducing its holdings of national debt to prevent currency devaluation. Continuing to issue bonds will inevitably lead to financial problems.
The Central Economic Work Conference stated to continue with a “more proactive fiscal policy.” Zhongjin Company suggests that the conference’s description of next year’s fiscal policy is somewhat restrained. It is believed that this might be related to the call for fiscal sustainability against the backdrop of debt reduction, suggesting that broad fiscal deficit ratios may not increase significantly next year.
Wang Guochen pointed out, “Officials still emphasize infrastructure or investments in high-tech areas. However, these investments are low efficiency, leading to the continuous rise of the debt-to-GDP ratio. At this rate, next year, it should surpass 300%, surpassing Japan to become the world’s largest debtor nation. In this situation, next year’s ‘more proactive’ fiscal policy becomes a sloganistic promotion.”
He believes that all of the financial issues in China are continuously building up. Although the debt is high at the moment and China is still making money due to exports, if the exports suddenly collapse next year, and they cannot earn money, the pressure from debt will skyrocket.
Wang Guochen explained that this year, besides half of the export surplus, a significant portion consisted of equipment. It turns out that Chinese companies looking to invest overseas are starting to move equipment overseas. Once this money-making tool is gone, coupled with countries starting to block China’s exports, China’s exports will inevitably decline. “When exports cannot bring in revenues, it will further increase internal financial pressure. This should be the main focus next year.”
The Central Economic Work Conference mentioned resolving local fiscal difficulties, ensuring the basic “three guarantees” at the grassroots level (ensuring basic livelihoods, wages, and operations). Hong Kong’s “Ming Pao” newspaper pointed out that this is the first time the authorities have raised tackling local financial difficulties in a conference like this.
Qiu Wanjun stated that the CCP’s “three guarantees” aim to maintain the concrete symbols where state power is held in the private sector and ensure the basic functioning of local government authority.
Wang Guochen pointed out that in recent years, central meetings have continuously emphasized that local financial risks are one of the three major financial risks. This time, it’s just a change in wording.
He stated, “While the central government wants to secure local finances, they have also mentioned ‘each family should hold their child,’ meaning that they don’t want to be held hostage by local governments. CCP policy has always been swinging between the two extremes. I believe there won’t be much progress next year because the central government has been reluctant to rescue local governments, only out of fear that local issues could escalate and affect the entire Chinese economy.”
According to reports by “First Financial,” local government expenditures have generally exceeded local-level income, relying on transfers from the central government to local areas, debt income, and other sources to make up for the shortfall. In the first ten months of this year, local general public budget revenues were about 10.5 trillion yuan, while expenditures were around 19.1 trillion yuan.
The main financial difficulty faced by local governments is the significant disparity between revenue and expenditures, where income is affected by real estate, leading to a noticeable gap. Reports from local financial officials in the eastern region indicate that tax revenue growth this year has been lower than expected, and income from land allocations has declined, with some townships and district-level areas even delaying salary payments.
In March, the annual meetings mentioned increasing local financial autonomy. Guangdong has shifted additional revenue from the four main tax categories towards municipalities and counties, increasing the income-sharing ratio of certain counties in eastern, western, and northern Guangdong from 50% to 90%.
Qiu Wanjun explained that for local governments to stabilize their finances, they need to increase tax revenue, ultimately paid by consumers and enterprises. However, the latest round of harvesting involves exhausting resources and excessive extraction from the public, “In fact, the central and local governments have been competing to see who can squeeze more money out of ordinary people.”
Wang Guochen noted that now taxes must be paid on various platforms, from take-out deliveries and buying gold to national bonds. Next year, the Chinese Communist Party will expedite the taxation process and expand its scope.
In recent years, apart from expanding tax revenue and enforcing recovery, non-tax revenue has become a buzzword in the economy. In 2024, China’s broad non-tax revenue (i.e., other fiscal income beyond taxation) significantly exceeded tax revenue. According to data from the Ministry of Finance, in 2024, broad non-tax revenue reached around 23 trillion yuan, notably higher than the tax revenue (around 17.5 trillion yuan). Most non-tax revenue comes from local governments, with fines becoming a significant component. Due to insufficient fiscal revenue, many regions in China have increased fines to generate income, leading to a rise in fines across tax audits and administrative law enforcement.
On December 12, Vice Premier He Lifeng stated in a national financial system working conference that continued efforts are needed to prevent and defuse risks related to financial institutions in local areas, financial risks of real estate enterprises, financial debt risks of local government financing platforms, strictly control the increment, appropriately handle the stock, and prevent “explosions,” while harshly cracking down on illegal financial activities.
An important factor affecting the economy, the Chinese real estate industry, continues to decline. The latest data from the National Bureau of Statistics shows that in November, overall commodity residential housing prices in 70 major cities experienced an overall decline.
Chinese real estate giant Vanke’s proposal to extend the maturity of a bond set to expire was not approved, raising the company’s default risk. This 2 billion yuan onshore bond matures on Monday (December 15) with a 3% coupon rate. Vanke will also convene another bondholder meeting on December 22 to seek an extension of the repayment term of a 3.7 billion yuan bond by one year, set to mature on December 28.
Amidst the continuous slump in the Chinese property market, Vanke, having a state-owned background, remains one of the few large real estate companies yet to collapse. Market analysts have long warned that Vanke’s deteriorating condition could drag down the Chinese economy, exacerbating the decline in the real estate market.
Wang Guochen believes that regarding Vanke’s issues, the authorities may opt for administrative measures where state-owned banks would provide relief or shift all debts back. However, it seems that the authorities are still delaying, contemplating whether to let Vanke default, or even face bankruptcy, yet they are concerned about potentially triggering a storm in the entire real estate market, leaving them wavering.
He added, “Xi Jinping insists on ‘housing is for living, not for speculation,’ making minimal efforts to rescue the market. As a result, after dragging on for so many years, the problem is now uncontainable. China’s real estate market will eventually burst; it’s just a matter of how it will collapse. It could either decline like Japan’s lost 30 years or face a sudden collapse like the Soviet Union’s regime.”
Qiu Wanjun mentioned that He Lifeng’s statement is relatively rare because the official culture of the Chinese Communist Party is usually about reporting good news, without emphasizing the risks. In past crises such as the stock market crash, the CCP officials did not mention preventing explosions but rather focused on maintaining market stability. By publicly insisting on guarding against explosions this time, He Lifeng indicated that the risks in China’s financial system have reached a point where they must be officially addressed as the problem is severe.
However, he believes that China currently lacks a better approach apart from postponing to adapt to changing circumstances.