China's Economy Is Growing 4.5% Despite Everything — Here Is What Beijing Is Actually Doing Right

China is projected to grow 4.5% in 2026 despite record tariffs and a struggling property market. Here is Deloitte's analysis of what Beijing is getting right and what remains at risk.

The persistence of Chinese economic growth — Deloitte projects 4.5 percent GDP growth for 2026 despite the combination of record US tariffs, a continuing property market downturn, and the global uncertainty created by the Iran war — is one of the most important economic stories of the current moment and one of the least well-understood outside China itself.

The headline story about Chinese exports is true: they hit all-time highs in 2025 despite tariffs. The mechanism is not mysterious. Chinese manufacturers are extremely good at adapting to changed trade conditions — when US tariffs make direct China-to-US trade expensive, Chinese companies invest in Vietnamese, Mexican, and Malaysian final-assembly operations that reroute the goods. The underlying manufacturing happens in China; the final assembly that determines the goods' origin for customs purposes happens elsewhere. This is trade diversion rather than trade destruction, and the Chinese economy captures most of the value.

What Beijing is deliberately doing in the domestic economy is managing a painful property market correction while using targeted fiscal policy to maintain growth in strategic sectors. The 'anti-involution' campaign — deliberately allowing overcapacity in non-strategic sectors like steel, cement, and solar panels to consolidate — is accepting short-term pain in commodity manufacturing to free resources and policy attention for advanced manufacturing, AI, and clean technology sectors where Beijing wants global leadership.

The renminbi appreciation that Deloitte forecasts — driven by China's current account surplus and the dollar's weakness — will complicate export competitiveness but will also increase Chinese purchasing power for imported resources and technology, reducing the cost of the energy transition that is central to Beijing's industrial strategy.

The genuine risks: domestic consumption remains suppressed, partly by property market anxiety and partly by the specific consumer psychology of a population that has watched significant household wealth evaporate in the property downturn. If Beijing cannot catalyse consumer spending growth, the 4.5 percent growth projection depends on exports and government investment maintaining pace — a dependency that creates vulnerability to any further deterioration in global trade conditions.