China Export Boom Can’t Stop Economy’s Worst Quarter in 2025

China’s economy likely expanded at its slowest pace in a year last quarter despite booming exports, underscoring a widening gap between external strength and weak domestic demand. The Communist Party may seek to rebalance growth toward consumption when it convenes for a key meeting next week.

Growth Slows to 4.7%

Data due Monday from the National Bureau of Statistics is expected to show gross domestic product (GDP) grew 4.7% year-on-year in the third quarter, down from 5.2% in the previous three months, according to a Bloomberg survey.

Retail sales likely rose 3% in September, while industrial output is forecast to have increased 5% — both marking the slowest pace this year. Economists also expect continued weakness in property and fixed-asset investment.

Party Meeting to Focus on Consumption

The slowdown comes ahead of the fourth plenum in Beijing, where policymakers are expected to outline China’s 2026–2030 development roadmap. Analysts see growing consensus that the country must boost consumption to offset risks from trade tensions and declining investment returns.

“Introducing a consumption target will send an even stronger signal of policy determination,” said Societe Generale’s Michelle Lam and Wei Yao.

Top officials have already hinted at greater emphasis on consumption after Donald Trump’s reelection, pledging to expand spending on education and employment. Yet household consumption still accounts for only about 40% of GDP, far below the global average of 56%, according to World Bank data.

Weak Demand, Persistent Deflation

Despite headline growth near the government’s 5% target, China’s economy faces mounting structural pressures. Price declines, overcapacity, and weak consumer sentiment are eroding company profits.

New data next week is expected to confirm nine consecutive quarters of deflation — the longest streak since the late 1970s. Housing remains a major drag, with home sales by the top 100 developers at just a quarter of pre-crash levels.

Meanwhile, fixed-asset investment is forecast to stagnate, as much of the government’s heavy borrowing has gone toward repaying debt rather than new spending. Local governments sold 11.5 trillion yuan of bonds in the first nine months of the year, a 60% increase from 2024, while the broad budget deficit widened 42% in the first eight months.

Exports Remain a Rare Bright Spot

China’s goods trade surplus hit a record US$875 billion so far this year, buoyed by robust demand from non-U.S. markets. Net exports contributed 6.4% of GDP in the first half — the highest in over a decade — cushioning domestic weakness and bolstering Beijing’s leverage in trade talks with Washington.

Still, the export boom hasn’t been enough to lift consumer prices or reverse the investment slump. Economists expect inflation to stay well below the government’s 2% target for 2025.

Limited Scope for Stimulus

With earlier fiscal expansion and solid first-half growth, economists say fresh large-scale stimulus is unlikely at next week’s party meeting. Beijing has already announced a 500 billion yuan “new financing policy tool” to support infrastructure projects.

“We don’t expect fixed-asset investment growth to drop further with infrastructure catch-up likely ongoing,” Citigroup economists led by Yu Xiangrong said. “The latest capital injection could support the numbers further towards year-end.”