In the first three quarters of 2025, China’s real GDP grew by 5.2% year-on-year (YoY), 0.4 percentage points higher than for the same period last year, indicating solid progress toward the full-year growth target of ‘around 5%’. However, on a quarterly basis, economic momentum softened in Q3. As policy priorities shifted towards addressing involutionary competition, earlier demand-boosting measures moderated. Real GDP growth slowed to 4.8% in Q3, down 0.4 percentage points from Q2, and the seasonally adjusted quarter-on-quarter pace dropped to one of the lowest levels on record.
In terms of consumption, total retail sales of consumer goods rose by 4.5% YoY in the first three quarters, 0.5 percentage points slower than in H1. Retail sales growth eased significantly to 3.5% in Q3, a 1.9-percentage-point slowdown from Q2, primarily due to diminished effects from the trade-in programme, combined with slowing household income growth and insufficient consumer confidence.
Housing sales remained weak in Q3, continuing to constrain developers’ willingness to invest. Real estate investment contracted further from –12.1% in Q2 to –19.2% in Q3, remaining the largest drag on fixed asset investment growth. Local governments, constrained by the need to ensure basic public services and manage risks, slowed the pace of infrastructure investment. Infrastructure investment growth fell sharply from 7.6% in Q2 to –5.8% in Q3. Manufacturing investment also contracted significantly as firms faced heightened external uncertainty, diminishing support from Clunkers Upgrade programme, and tighter measures to address involutionary competition. Manufacturing investment growth fell from 6.7% in Q2 to –1.2% in Q3.
Industrial production grew 6.2% YoY in the first three quarters, slightly lower than the 6.4% in H1. With the fading of the export front-loading effect and rising external uncertainty, industrial production weakened further in Q3. Production diverged from headline export performance, largely because firms accelerated production earlier in the year to meet anticipated export demand, leading to excess inventory. As a result, the resilience in Q2–Q3 exports was largely inventory-driven, providing limited support to production.
China’s exports increased by 6.1% YoY in the first three quarters, 0.2 percentage points higher than in H1. Q3 export growth accelerated by 0.3 percentage points from Q2 to 6.5%. Despite uncertainty in China–U.S. tariff negotiations in Q3, China achieved notable success in expanding non-U.S. markets: exports to non-U.S. markets rose by 12.6% YoY, contributing 10.7 percentage points to overall export growth and effectively offsetting the drag from the decline in exports to the U.S.
Looking ahead, two factors are expected to support economic activity: (1) a recent easing in China–U.S. trade tensions, and (2) a renewed policy focus on boosting domestic demand. With the coordinated strengthening of fiscal and monetary policy, investment-led domestic demand is poised for improvement in Q4, supporting the full-year growth target of ‘around 5%’.
