Key facts
- China's industrial production growth slowed to 4.5% in July.
- GDP growth slowed to 4.8% in Q3, with overall growth of 5.2% in the first nine months.
- Exports have risen 6.1% year-to-date, contributing significantly to growth.
- Domestic factors, including a property downturn and weak household consumption, are hindering economic recovery.
- Recent stimulus measures have shown limited impact on boosting consumption.
China's economy is facing persistent challenges, with consumer spending and investment data indicating a continued slowdown. While AI-related exports have provided some uplift, domestic weaknesses, particularly in the property sector and household consumption, are weighing on growth. Industrial production growth decelerated in July, and GDP growth for the third quarter was 4.8%, bringing the year-to-date figure to 5.2%. Policymakers have largely maintained a cautious stance after providing support in the second quarter, and recent stimulus measures have had limited success in revitalizing consumption.
Exports have remained a strong point, with a 6.1% year-to-date increase and a trade surplus expected to exceed $1 trillion by the end of 2025. However, this reliance on exports is seen as unsustainable amid growing global trade barriers. Domestic issues, such as the property market collapse and financial pressures on local governments, have significantly slowed private and government investment. Chinese consumers have not experienced a post-Covid reopening boom, with household consumption and retail sales remaining below pre-pandemic growth trends. Removing regulations on the service sector is suggested as a potential avenue to stimulate consumption.
The Fourth Plenum reaffirmed China's economic policy priorities, emphasizing strengthening consumption and technological innovation. This suggests a continued confidence in the current policy direction rather than a major shift, despite the economic headwinds.