London, UK, 29 January 2026 – China delivered 5% GDP growth in 2025, hitting Beijing’s target precisely. For investors, however, the challenge is not the headline number – it is whether that growth is durable, investable and resilient to shocks.
New analysis from Permutable AI using their China Macroeconomic Sentiment Indicators shows headline stabilisation has not yet translated into broader confidence. While hard data points to stabilisation, sentiment across households, property and domestic demand remains weak – signalling that growth remains policy-supported as domestic base rebuilds as China moves into 2026.
“Investors are being asked to price stability off headline data, but confidence is still rebuilding,” said Jack Watson, Market Analyst at Permutable AI. “Our sentiment indicators suggest stabilisation in the data is not yet being met with a comparable improvement in household and private-sector conviction, which matters for how durable the cycle proves in 2026.”
The Investor Problem: Data Looks Stable, Risk Does Not
For asset allocators, China presents a familiar dilemma: official macro data suggests control and resilience, yet markets remain uneasy. Traditional indicators explain where the economy has been, but they struggle to capture whether households, firms and policymakers believe the recovery will last.
Permutable AI’s sentiment indicators address this gap by tracking narrative intensity and tone across domestic and international sources in real time – revealing whether confidence is forming ahead of the data or quietly eroding beneath it.
“For investors, the market focus is shifting from the level of growth to how resilient it is under different external conditions,” Watson added. “Our sentiment indicators show that China’s current growth mix is being carried by exports and policy continuity. Without a rebuild in domestic conviction, that support can unwind much faster than the official data implies.”
Growth Sentiment Signals a Narrow, Externally Driven Cycle
GDP growth slowed to 4.5% y/y in Q4, the weakest pace in three years. While the annual target was met, Permutable AI’s domestic growth sentiment indicators continued to trend lower, failing to validate the headline stabilisation.
International sentiment held up more convincingly, pointing to an economy still leaning heavily on exports, trade rerouting and policy continuity rather than domestic momentum.
Manufacturing Strength Masks a Domestic Demand Shortfall
Industrial production accelerated into December and PMIs edged back above 50. But sentiment indicators reveal a clear divergence. International manufacturing sentiment tracked the improvement closely, while domestic manufacturing sentiment remained fragile.
The result is an export-led production cycle that keeps factories running without lifting confidence at home.
Consumption and Housing Sentiment Flag Ongoing Vulnerability
Retail sales growth slowed sharply at year-end, with total retail sales rising just 0.9% y/y in December 2025, the weakest monthly advance since late 2022. Meanwhile, real estate development investment contracted 17.2% in 2025, reflecting continued weakness in the property sector. Permutable AI’s sentiment indicators flagged slowing narratives around consumption and property well ahead of these softer official prints, highlighting their value as leading signals of underlying market momentum.
Housing sentiment remains structurally negative, with only short-lived improvements around policy announcements.
Inflation Sentiment Confirms Thin Pricing Power
Although CPI has moved back into positive territory, inflation sentiment remains skewed toward disinflation. Firms continue to price for volume, not margin, reflecting weak demand expectations and excess capacity.
2026 Outlook: How Sentiment Helps Investors Navigate Risk
With expected GDP growth of 4.5% – 4.7% in 2026 – assuming trade conditions remain supportive – domestic conviction however is still weak, with the economy more exposed to shifts in trade confidence, geopolitics and policy narratives. This is where sentiment indicators become highly valuable for investors.
How Investors Use These Indicators
Permutable AI’s China sentiment indicators help investors:
- Identify whether growth momentum is domestic or externally supported
- Flag regime shifts before they appear in official data
- Manage China exposure across rates, FX, equities and cross-asset strategies
- Avoid false comfort from stable headline prints when conviction is deteriorating
About Permutable AI
Permutable AI helps institutional investors see what others miss by turning global narratives, sentiment and context into actionable macro intelligence. Our sentiment-driven macroeconomic indicators analyse millions of data points across media, policy and market signals in real time, helping investors anticipate regime shifts across commodities, FX, rates and global markets.
Our regional sentiment indices are used by hedge funds, banks, asset managers and commodity desks to distinguish stabilisation from genuine improvement, identify emerging risks, and manage exposure in complex, fast-moving markets.
Charts and supporting data visualisations referenced in this release are available on request.
See Also:
Permutable AI: Turning Global Perception into Real-Time Edge | Disruption Banking
