China’s economy likely expanded just 4.7% in the third quarter, marking its slowest pace in a year as weakness in retail sales, investment, and industrial output offset record exports. Despite an $875 billion goods trade surplus, economists warn that the domestic engine of growth is faltering, exposing the limits of Beijing’s reliance on external demand.
Factories have kept shipments abroad at record levels, but Chinese consumers remain cautious. Retail sales rose only 3% in September, while industrial production grew 5%, both the weakest readings this year. Fixed-asset investment was flat, dragged by the prolonged property downturn and declining manufacturing sentiment.
Government borrowing has surged, but much of the stimulus has gone toward infrastructure rather than household income, offering limited support to domestic consumption. Meanwhile, foreign direct investment fell nearly 13% in the first eight months of 2025 as overseas firms scaled back exposure amid trade tensions and weaker growth prospects.
The slowdown comes just days before the Communist Party’s Fourth Plenum, where leaders will set economic priorities through 2030. Analysts expect the meeting to emphasize the long-delayed goal of consumption-led growth. As Chang Shu, Chief Asia Economist at Bloomberg Economics, noted, “Old growth engines like property and heavy industry are no longer enough, China is confronting a deeper transition.”
The IMF projects 4.8% growth in 2025, easing to 4.2% in 2026, and has urged Beijing to boost household spending and curb industrial subsidies to reduce imbalances. It warned that China risks sliding into a debt-deflation cycle if the government fails to rebalance toward consumer-driven activity.
China’s deceleration comes at a sensitive global moment. With the U.S. tightening tariffs and Europe battling inflation and energy shocks, a weaker Chinese economy threatens to further strain global trade in 2026.
As officials gather in Beijing this week, the message is clear: China’s export engine remains powerful, but without stronger domestic demand, sustaining momentum in the world’s second-largest economy will be increasingly difficult.