China’s Economy Slowdown Deepens Amid Trade War
Fixed-asset investment rose just 0.5% in the first eight months of 2025, its weakest performance outside the pandemic years.
Quick overview
- China's economic indicators weakened in August, prompting speculation about potential new stimulus measures to support consumption.
- Retail sales growth slowed to 3.4% year-on-year, the lowest since November 2024, indicating a diminishing effect from previous consumer goods stimulus programs.
- Industrial production increased by only 5.2%, the weakest growth in a year, as external demand declined and the shift to domestic consumption faces challenges.
- Fixed-asset investment rose just 0.5% in the first eight months of 2025, highlighting significant weaknesses in manufacturing and the real estate sector.
China’s key economic indicators lost momentum in August, coming in weaker than market expectations and raising the prospect of fresh stimulus to support consumption, much like last year.
At the same time, as trade negotiations with the U.S. drag on, concerns over deflation are mounting—driven by the redirection of exports into the domestic market.
Retail Sales Hit Nine-Month Low
Retail sales rose 3.4% year-on-year last month, the slowest pace since November 2024, according to the National Bureau of Statistics. Adjusted for inflation, growth was virtually flat, reflecting the fading impact of last year’s consumer goods stimulus programs. Analysts also flagged a broader slowdown in services activity.
Industrial Output Weakens
Industrial production climbed 5.2% in August, its lowest level in a year, as external demand softened. Export-oriented manufacturing has slowed, highlighting the limits of China’s ongoing shift from an export-driven model to one more reliant on domestic consumption. For that transition to succeed, policymakers must boost household spending power and wages.
Investment Loses Steam: Property in Focus
Fixed-asset investment rose just 0.5% in the first eight months of 2025, its weakest performance outside the pandemic years. The decline has weighed heavily on manufacturing, infrastructure, and particularly real estate—a sector under close watch.
Stimulus Back on the Table?
The pattern mirrors last year, when weaker summer data eroded confidence before the People’s Bank of China rolled out fiscal easing in September. That shift toward stimulus helped deliver a strong fourth-quarter rebound, allowing GDP growth to close 2024 at 5%.
With August data again underperforming, analysts are betting Beijing could unveil a new round of measures aimed at boosting consumption to keep growth on track with Five-Year Plan targets.
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