PUBLISHED February 28, 2026
According to Fitch Ratings’ report “China’s Domestic Demand Weakness to Limit Growth to 4.1% in 2026,”
China’s economic expansion is expected to moderate in the coming year as subdued household consumption and weak investment continue to weigh on domestic momentum.
Fitch argues that although external demand has provided some support, the main constraint on China’s growth outlook remains internal rather than external.
Growth Forecast to Slow Further
Fitch forecasts China’s real GDP growth will ease to 4.1% in 2026, down from around 5.0% in 2025.
The agency expects the economy to continue expanding but at a clearly slower pace than in the recent past.
The outlook reflects Fitch’s assessment that domestic demand recovery will remain incomplete, limiting the strength of the overall growth trajectory.
A key theme in the report is the persistence of weak internal demand. Fitch highlights subdued consumer confidence and soft investment activity as major factors holding back momentum.
The property sector downturn continues to weigh on the economy, while challenges linked to local government finances are also restraining investment. Together, these pressures are expected to keep domestic demand from becoming a strong growth engine in 2026.
A key theme in the report is the persistence of weak internal demand. Fitch highlights subdued consumer confidence and soft investment activity as major factors holding back momentum.
The property sector downturn continues to weigh on the economy, while challenges linked to local government finances are also restraining investment. Together, these pressures are expected to keep domestic demand from becoming a strong growth engine in 2026.
While exports have recently been more resilient, Fitch does not expect external demand to fully compensate for domestic softness over the medium term. The report suggests that the contribution from net trade is likely to diminish, which would leave China’s growth increasingly dependent on the strength of its internal economy.
This dynamic reinforces the agency’s view that the current growth pattern remains uneven.
Fitch expects Chinese authorities to continue implementing measures aimed at stabilising growth and supporting demand. However, the agency anticipates that policy easing will remain measured rather than aggressive.
As a result, policy support is likely to cushion the slowdown but not generate a strong cyclical rebound.
Overall, Fitch’s baseline scenario points to a managed deceleration rather than a sharp downturn. China is expected to maintain positive growth, but the economy appears to be settling into a lower-speed phase.
The key variable to watch in 2026 will be whether household consumption and private investment show clearer signs of recovery.
Bottom line: Fitch expects China’s growth to slow to 4.1% in 2026 as weak domestic demand continues to weigh on the economy. Policy support and exports provide some buffer, but the expansion is likely to remain moderate.
While exports have recently been more resilient, Fitch does not expect external demand to fully compensate for domestic softness over the medium term. The report suggests that the contribution from net trade is likely to diminish, which would leave China’s growth increasingly dependent on the strength of its internal economy.
This dynamic reinforces the agency’s view that the current growth pattern remains uneven.
Fitch expects Chinese authorities to continue implementing measures aimed at stabilising growth and supporting demand. However, the agency anticipates that policy easing will remain measured rather than aggressive.
As a result, policy support is likely to cushion the slowdown but not generate a strong cyclical rebound.
Overall, Fitch’s baseline scenario points to a managed deceleration rather than a sharp downturn. China is expected to maintain positive growth, but the economy appears to be settling into a lower-speed phase.
The key variable to watch in 2026 will be whether household consumption and private investment show clearer signs of recovery.
Bottom line: Fitch expects China’s growth to slow to 4.1% in 2026 as weak domestic demand continues to weigh on the economy. Policy support and exports provide some buffer, but the expansion is likely to remain moderate.
Reform PRODUCTS & SERVICES Group
Szentendrei út 87.
1033 Budapest
Hungary