China’s economic recovery lost steam in the third quarter of 2025, with GDP expanding by 4.8% year-on-year, down from 5.2% in Q2, according to official data from the National Bureau of Statistics. This marks the slowest quarterly growth rate in a year, signaling mounting challenges for the world’s second-largest economy.
Despite the quarterly slowdown, China’s economy still posted a 5.2% growth over the first nine months of 2025, keeping the country on track to meet its full-year target of “around 5%”.
What’s Behind the Slowdown?
📉 Weaker Consumer Spending
Retail sales, a key gauge of domestic demand, grew by just 3.0% in September, significantly slower than earlier in the year. This reflects ongoing consumer caution amid uncertainty around jobs, wages, and real estate prices.
🏚️ Property Sector Struggles
The real estate sector remains a major drag. Fixed-asset investment in property fell 0.5% year-on-year from January to September, with ongoing developer defaults and declining home sales weighing on investor confidence.
🌐 External Headwinds
China’s export sector showed relative strength, but global trade tensions, rising tariffs, and slower demand from key markets continue to cap upside potential.
Where Growth Is Coming From
🏭 Industrial Output Rebounds
Industrial production rose 6.5% year-on-year in September, buoyed by gains in manufacturing, mining, and utilities. This suggests the industrial sector is still a strong pillar of the economy.
🚢 Exports Remain Resilient
Despite global volatility, China has maintained solid export performance, supported by its pivot toward emerging markets and diversification of trade partners.
Government Outlook & Policy Implications
Chinese policymakers are expected to continue targeted stimulus measures to support growth in Q4, particularly in infrastructure, small businesses, and household consumption.
Monetary policy may stay accommodative, but with growing concerns around financial stability and local government debt, room for aggressive stimulus remains limited.
Outlook for Q4 and Beyond
Reaching the 5% growth target is still achievable but will likely require stronger momentum in Q4. Key areas to watch include:
- Consumer sentiment during the end-of-year holiday period
- Progress in stabilizing the real estate market
- Policy shifts ahead of the 2026 National People’s Congress
Conclusion
While China’s Q3 2025 GDP growth slowed to 4.8%, the broader economy still shows signs of resilience. However, to maintain momentum and investor confidence, policymakers must address structural weaknesses in the domestic economy while navigating growing geopolitical and trade uncertainties.
