Article 3: The new logic of the Chinese economy
Why in News: Despite global economic uncertainty, China’s resilient growth performance in 2025 reinforces its role as a key driver of global economic recovery and a significant stakeholder for India and the world.
Key Details
- Economic size & growth: GDP exceeded 140 trillion yuan with steady 5% growth despite global headwinds.
- Global contribution: China remains a major engine of world economic growth.
- Structural transition: Growth drivers are shifting towards a more balanced and sustainable model.
- India focus: Specific concerns relate to growth drivers, exports, and the bilateral trade deficit.
Domestic demand as the primary growth engine
- Final consumption expenditure contributed 52% to GDP growth in 2025
- Lower prices do not imply weak consumption, but reflect cost efficiency
- China ranks high globally in physical consumption indicators
- 1.28 mobile phones per capita, among the world’s highest
- Daily protein intake of 124.6 grams, higher than the US and Japan
- Annual vegetable consumption of 109.8 kg, the highest globally
- Rising consumption indicates improving living standards
Exports as a major growth booster
- Exports of goods and services contributed 32.7% to economic growth
- Strong performance despite an unfavourable global trade environment
- High-tech exports grew by 13.2% in 2025
- Growth driven by
- Complete industrial supply chains
- Continuous technological innovation
- Stable exports to ASEAN and the European Union offset volatility elsewhere
Investment and structural transition
- Gross capital formation contributed 15.3% to growth
- Reflects a shift away from investment-led growth
- China is transitioning toward
- Consumption-led growth
- Innovation-supported exports
- Emerging sectors showing strong momentum
- Artificial Intelligence
- Quantum technologies
- Brain–computer interfaces
- High-end manufacturing such as industrial robots and servers
- Green industries like renewable energy and clean technology expanding rapidly
Exporting capacity, not overcapacity
- China exports high-quality and advanced production capacity, not surplus output
- Capacity utilisation rate stood at 74.4% in large industries
- Comparable to US and EU levels
- Competitiveness driven by
- Long-term R&D investment
- Intense domestic competition
- Comprehensive industrial ecosystem
- Strong exports reflect real global demand, especially from developing countries
- Chinese technology supports
- Infrastructure development
- Energy transition
- Industrialisation
China–India trade dynamics
- Bilateral trade reached a record $155.6 billion in 2025
- Indian imports largely consist of
- Raw materials
- Intermediate components critical for manufacturing
- India’s exports to China reached $19.7 billion
- 9.7% year-on-year growth
- Sharp acceleration in late-2025
- China maintains
- Low average tariff level (7.3%)
- Reduced FDI negative list
- Expanding visa-free access
Way Forward
- Expand market access for high-quality Indian products in China.
- Leverage platforms like the China International Import Expo to promote Indian exports.
- Align with China’s priority of expanding domestic demand in 2026.
- Encourage business-to-business cooperation to reduce trade imbalances organically.
- Focus on complementarity, not competition, in supply chains and manufacturing.
Conclusion
- China’s 2025 performance highlights economic resilience amid global uncertainty.
- The shift toward consumption-led, innovation-driven growth strengthens long-term prospects.
- China–India economic cooperation holds vast untapped potential.
- By moving closer through trade, investment, and market integration, both countries can share development dividends and contribute to a more prosperous Asia.