China's Economy Grows 4.8% in Third Quarter
China's economy expanded by 4.8% year-on-year in the third quarter of 2025, according to data released by the National Bureau of Statistics (NBS). This growth rate, while in line with market expectations, marks a deceleration from the 5.2% recorded in the second quarter of the year. On a quarter-on-quarter basis, the economy grew by 1.1%. For the first three quarters of 2025, China's GDP increased by 5.2% year-on-year, positioning the country to meet its annual growth target of 'around 5%'.
Resilience in Industry and Exports Offset Domestic Weakness
The economic performance in Q3 was largely supported by robust industrial output and strong exports. Industrial output saw a significant rise of 6.5% year-on-year in September, benefiting from resilient external demand. The tertiary industry, encompassing the services sector, also contributed positively to growth, expanding by 5.4% year-on-year in the third quarter. However, this external strength contrasts with persistent challenges in domestic demand.
Concerns Mount Over Weak Consumption and Investment
Despite the headline growth figure, concerns are deepening over weak domestic consumption and declining investment. Retail sales growth slowed to 3.0% year-on-year in September, a decrease from 3.4% in August, reflecting subdued consumer confidence. The impact of previous trade-in policies appears to be fading, and spending during the recent Golden Week national holiday was described as 'mildly disappointing'.
Fixed asset investment (FAI) declined by 0.5% year-to-date in the first three quarters of 2025, marking its weakest level since July 2020. This downturn was broad-based, with private investment contracting sharply by 3.1% year-to-date and foreign investments falling by 12.6% year-to-date. The struggling property market continues to be a significant drag on the economy, with property investment declining by 13.9% year-to-date and new home sales projected to fall by 8% in 2025. Weak confidence is cited as a major factor impeding domestic economic activity, further exacerbated by a prolonged property sector downturn affecting household wealth and consumption.
Policy Outlook and Future Direction
While the Q3 GDP data might temper the immediate urgency for aggressive policy interventions, policymakers are under pressure to introduce further stimulus measures. The People's Bank of China (PBOC) has already implemented easing policies, including rate cuts and reductions in the Reserve Requirement Ratio (RRR), and economists anticipate further rate cuts by year-end. Discussions at the recent Fourth Plenum meetings are focusing on the 15th Five-Year Plan (2026-2030), which is expected to prioritize modernization, technological innovation, self-sufficiency, and bolstering domestic demand, with an implied annual GDP growth rate of 4-5% over the next decade. The NBS acknowledges that the economy faces multiple risks and challenges, emphasizing the need to consolidate the foundation for domestic economic recovery.
5 Comments
Comandante
Still 4.8% growth is impressive for such a large economy. They're on target!
Muchacha
Their 'around 5%' target is barely met. This isn't the strong growth narrative they want.
Matzomaster
It's good to see industrial output and exports holding up the economy, but the deep dive in private and foreign investment cannot be ignored. Long-term growth needs more than just external demand; it requires internal confidence and capital.
Rotfront
While the overall GDP growth of 4.8% is still respectable globally, the underlying weakness in domestic consumption and investment is concerning. External factors are currently propping up an increasingly fragile internal market.
Karamba
The policymakers are clearly aware of the challenges and are implementing easing measures, which is positive. However, the persistent drag from the property market suggests these interventions might not be enough to quickly restore broad-based confidence.