China’s economic growth slowed to its weakest level in a year during the third quarter, raising questions about the resilience of its growth model and highlighting persistent structural imbalances.
Fragile domestic demand and reliance on exports have emerged as key challenges for policymakers, reported Reuters.
GDP grew 4.8 per cent in Q3. On a quarterly basis, the economy expanded 1.1 per cent, slightly exceeding expectations of 0.8 per cent and surpassing the revised 1.0 per cent gain from Q2. Year-to-date growth from January to September reached 5.2 per cent, keeping China on track to meet its 5 per cent annual target.
Consumer spending remains weak. Retail sales in September rose just 3.0 per cent, marking a 10-month low, while fixed-asset investment contracted 0.5 per cent year-on-year from January to September, the first decline since the pandemic.
The domestic slowdown is evident across multiple sectors, adding pressure on businesses reliant on local demand.
Exports Provide Temporary Relief
Manufacturing and exports have cushioned growth to some extent. Although exports to the US dropped 27 per cent year-on-year, shipments to the EU, Southeast Asia, and Africa grew by 14 per cent, 15.6 per cent, and 56.4 per cent, respectively. Despite this, Chinese manufacturers are struggling with intense global competition, often sacrificing profit margins to maintain market share.
Jeremy Fang, a sales officer at a Chinese aluminium firm, noted, “If your price is $100 and the customer starts bargaining, it's better to drop $10–$20 and take the order. You can’t hesitate.” His experience highlights the cost pressures faced by exporters outside the US.
Trade Tensions Cast a Shadow
Renewed friction with Washington adds uncertainty. President Trump has threatened to increase tariffs on Chinese goods by 100 per cent starting November 1, though officials suggest both sides may seek to ease tensions ahead of potential high-level discussions, including a possible Trump-Xi meeting at the APEC summit in South Korea.
Lynn Song, chief economist for Greater China at ING, said, “With China on track to hit this year's growth target, we could see less policy urgency. But weak confidence translating to soft consumption, investment, and a worsening property price downturn still need to be addressed.”
The property market remains a drag, with investment down 13.9 per cent year-on-year in the first nine months. Limited stimulus measures have so far provided minimal relief, leaving consumer confidence subdued.
Policy Focus and Long-Term Plans
Chinese leaders are holding closed-door meetings this week to discuss the 15th five-year development plan, expected to emphasise high-tech manufacturing amid rising US tensions. Analysts are also watching the December Politburo session and Central Economic Work Conference for policy direction in 2026.
Dan Wang, China director at Eurasia Group, said, “I don't think there will be additional consumption-focused stimulus. The focus is long-term, including pension reform, which will improve consumption in the future but reduce it in the short term due to layoffs and less cash in hand.”
Mixed Industrial Signals
Industrial output rose 6.5 per cent year-on-year in September and August’s 5.2 per cent, reflecting uneven growth. While manufacturing shows resilience, weak domestic consumption and declining property investment continue to challenge China’s economic stability.
Policymakers face a delicate task: maintaining headline GDP growth while tackling structural weaknesses. With exports offering temporary support and domestic demand lagging, the coming months will be crucial for China’s economic trajectory.
