Industrial, consumer data put strain on $19 trillion Chinese economy
Official data from the National Bureau of Statistics (NBS) on August 15 showed industrial production rising 5.7 percent year-on-year, the lowest since November 2024 and down from June's 6.8 percent increase, missing forecasts of 5.9 percent. Retail sales, a key measure of consumption, grew just 3.7 percent—the slowest since December 2024—compared with 4.8 percent in June and well below the expected 4.6 percent.
The weak readings come as Beijing grapples with multiple challenges: U.S. President Donald Trump's trade measures, intense domestic competition, a prolonged property slump, and disruptions from extreme weather. Although a temporary U.S.-China trade truce, extended this week for another 90 days, has prevented tariff rates from returning to previous highs, Chinese manufacturers still face sluggish demand and factory-gate deflation.
"The economy is quite reliant on government support," said Xu Tianchen of the Economist Intelligence Unit, noting that earlier policy measures were "front-loaded" in early 2025 and have since lost impact. While those steps helped avert a sharper slowdown, analysts expect weak domestic demand and global risks to weigh on growth in coming quarters.
Fixed asset investment grew only 1.6 percent in the January–July period from a year earlier, down from 2.8 percent in the first half and far below forecasts of 2.7 percent. Some sectors, however—notably automobiles, shipbuilding, aerospace, and other transport equipment—remain bright spots, benefiting from policy-driven support.
Beijing has pledged fresh measures to stimulate consumption and curb "disorderly" price competition, aiming to hit its 2025 growth target of around 5 percent. Yet overcapacity and steep discounting are keeping consumers on the sidelines, waiting for further price drops. Bank lending data earlier this week showed new yuan loans contracting in July for the first time in two decades, highlighting weak private-sector demand.
The property sector's protracted slump continues to sap consumer confidence. New home prices fell 2.8 percent year-on-year in July, extending a two-year downturn. "It's difficult to expect consumers to spend with greater confidence if their biggest asset continues to decline," said ING's Lynn Song.
Extreme weather—heatwaves, storms, and floods—has further disrupted production and commerce. A Reuters poll forecasts GDP growth slowing to 4.5 percent in the third quarter and 4.0 percent in the fourth, with full-year 2025 growth at 4.6 percent, below last year's 5.0 percent and short of the government's goal. Growth is expected to ease further to 4.2 percent in 2026, suggesting Beijing faces a challenging path to reignite domestic demand and stabilize its slowing economy.
"We see little reason to expect much of an economic recovery during the rest of this year," said Zichun Huang, China economist at Capital Economics.
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