China’s economy expanded at its weakest pace in a year during the third quarter of 2025, growing 4.8% annually, as persistent domestic weaknesses and escalating trade tensions with the United States dampened growth. Official data released on Monday highlighted a slowdown from the 5.2% growth recorded in the previous quarter, underscoring the fragility of the world’s second-largest economy amid global uncertainties.
The slowdown was primarily driven by a deepening property crisis and sluggish consumer spending. Real estate investment plummeted by 13.9% in the first nine months of the year, continuing a trend that has weighed heavily on economic momentum since 2021. Concurrently, retail sales increased by just 3% in September compared to a year earlier, marking the slowest rise since November and reflecting ongoing caution among Chinese households. This domestic weakness offset gains in other sectors, contributing to the overall deceleration.
Trade tensions with the U.S. flared up recently after China imposed controls on exports of rare earth minerals, essential for electronics production, prompting a swift response from President Donald Trump who threatened additional tariffs. This move jeopardized a fragile trade truce that had previously allowed Chinese exports to rise by 8.4% in September, as businesses rushed to ship goods before potential new barriers. The escalation has raised concerns about further disruptions to global supply chains and economic stability.
Despite the overall slowdown, industrial production provided a silver lining, growing by 6.5% in September, outperforming expectations. Sectors such as 3D printing, robotics, and electric vehicles showed particular strength, supported by government incentives and technological advancements. The service sector, including IT and logistics, also contributed to growth, though it was insufficient to offset broader weaknesses in the economy.
Fixed-asset investment contracted by 0.5% in the first three quarters, its first decline since 2020, signaling reduced confidence among businesses and local governments. This drop, coupled with the property slump, has highlighted China’s overreliance on exports at a time of mounting global trade fragmentation. Analysts note that without robust domestic demand, the economy remains vulnerable to external shocks.
In response, Beijing has rolled out billions in subsidies and wage increases to stimulate spending, but economists suggest growth is unlikely to exceed 4.8% this year without further support. The data sets the stage for China’s top leaders to discuss a new Five-Year Plan this week, which will outline economic goals and potential stimulus measures to address structural issues and sustain long-term development.
Diplomatic efforts are underway to ease tensions, with U.S. Treasury Secretary Scott Bessent expected to meet Chinese officials in Malaysia to prepare for a potential Trump-Xi summit. However, the outcome remains uncertain, as both nations navigate a complex relationship amid tariff threats and strategic competition. The talks could influence future trade policies and economic cooperation.
Looking ahead, China’s economic trajectory hinges on balancing internal reforms with external pressures. While exports and industrial output offer some resilience, sustained growth will require addressing the property sector’s drag and boosting consumer confidence, all while managing the volatile trade landscape with the U.S. The upcoming Five-Year Plan and international dialogues will be critical in shaping the path forward.