Nomura Asia Insights: China - Q4 Growth Slowed on Weak Consumption and Plummeting Investment
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Nomura reports that China's fourth-quarter 2025 real GDP growth decelerated to 4.5% year-over-year, down from 4.8% in the third quarter, aligning with market consensus but exceeding the firm's 4.3% forecast. The slowdown was driven by weakening domestic demand, evidenced by retail sales growth collapsing to a mere 0.9% annually, reflecting the diminishing effects of consumer trade-in policies.
Investment metrics deteriorated severely. Fixed-asset investment plunged 16% year-over-year in December, significantly missing expectations. This decline was anchored by a staggering 36.3% drop in property investment and sharp contractions in both manufacturing and infrastructure spending. While industrial output rebounded to 5.2% on the back of resilient exports, the underlying domestic fundamentals remain fragile.
Demographic pressures further complicate the outlook, with 2025 newborns falling to a record low of 7.92 million. Nomura asserts that current policy measures fall significantly short of stabilizing growth. The firm anticipates Beijing will need to deploy more aggressive stimulus, projecting a 10 basis point interest rate cut and a 50 basis point reserve requirement ratio reduction by the second quarter of 2026 to counterbalance structural economic headwinds and support broader macroeconomic stability.