Is China’s economy slowing down in 2025?

China’s economy showed evident signs of slowing in August 2025. Major indicators such as industrial output, consumer demand, investment, employment, exports, and the housing market all pointed towards softening momentum. The data suggests that policymakers may have to step up support to maintain the current annual growth targets.

Industrial Output Drops Below Expectations

China’s factory output rose 5.2% year-on-year, but this was slower than 5.7% in July and below market expectations. Reports suggest that extreme weather conditions disrupted manufacturing production. The weaker pace indicates that the recovery in industrial activity remains fragile and heavily dependent on policy support.

Retail Demand Shows Weak Consumer Confidence

Retail sales increased by 3.4% in August, which was the slowest pace since November 2024. Consumer sentiment remains subdued as the labour market is still under pressure and household wealth has been affected by falling property prices. Many families appear to be saving more and spending less, indicating a cautious approach towards consumption in the current environment.

Labour Market Conditions Worsen Slightly

The urban unemployment rate rose from 5.2% to 5.3%, suggesting mild pressure on the labour market. Economists warn that if employment conditions do not improve, consumption could fall further, affecting overall GDP growth.

Property Sector Remains the Biggest Risk

The property sector continues to be the centre of concern for China’s economy. New home prices fell by 0.3% month-on-month and declined by 2.5% on a yearly basis. Property investment has dropped significantly during the January to August 2025 period, and home sales by area have also fallen. Since real estate is closely linked with construction, banking and household wealth, its weakness remains a major threat to overall economic stability.

Policy Support Likely to Increase

Authorities have indicated that stronger policy measures may be introduced to support growth. A subsidy scheme for personal consumer loans and an appliance trade-in programme have already been rolled out. However, reports suggest that some local governments are facing funding limitations, which could slow the implementation of economic support measures and reduce their effectiveness.

Exports Slow as Global Demand Softens

China’s exports slowed to their weakest pace in six months during August. Exports to the United States reportedly fell sharply, indicating that global trade conditions remain challenging despite the absence of new tariffs. The external sector is likely to remain sensitive to geopolitical developments and shifts in global demand over the remainder of the year.

Investment Growth Loses Steam

Fixed-asset investment, which is a key indicator of long-term business confidence, grew by only 0.5% in the first eight months of 2025. This was noticeably slower than the pace seen earlier in the year. Lower investment suggests that businesses are hesitant to expand without clearer guidance on policy direction and future market conditions.

Economic Outlook: Stabilisation or Further Weakening?

The latest data indicates that China is facing a difficult period marked by weakening domestic demand and uncertain global conditions. The performance of the property sector, consumer sentiment, and the scale of policy intervention will determine whether growth stabilises or declines further. The overall outlook remains cautious, with risks still tilted to the downside.