The growth rate of the Chinese economy in the third quarter of 2025 decreased, and although it still remains a dream for many Western economies, its components raise doubts. Despite strong exports and production, the real estate crisis is still a pressing problem. Economists are also concerned about the decline in investment in fixed assets – the second such case in 33 years.
In the third quarter, the Chinese economy recorded the weakest growth rate in 2025, which, however, is still the envy of most Western countries. According to official data, gross domestic product strengthened by 4.8% year-on-year, compared to 5.2% in the April-June period. The year-round goal of the communist authorities is to achieve a growth rate of 5%.
Unlike many other global economies, China does not report the contribution of consumption, investment and exports to GDP growth. However, they publish a number of separate activity indicators on the basis of which certain conclusions can be drawn.
The Chinese data package presented on Monday, October 20, paints a picture of an economy that cannot overcome the crisis in the real estate market, and its main drivers remain production and exports, negating the authorities' efforts to base growth more on domestic consumption.
The Chinese save. The real estate market remains in crisis
Retail sales in China rose 3% year-on-year in September. This is the result of the expiring support of the authorities, which subsidized citizens this year for replacing household appliances. Its sales rose a modest 3.3% in September, compared with a government-money-fueled 25.3% gain in the first three quarters of the year.
The low level of Chinese spending was also confirmed by last week's inflation reading. According to it, the consumer price index fell by 0.3% last month. China is therefore constantly facing deflation. The fierce competition for consumers is highlighted by the producer price index which has been falling for almost three years. The so-called PPI inflation in China fell by 2.3% in September.
According to analysts, stimulating domestic consumption will be difficult unless Beijing deals with the crisis in the real estate sector first. Despite a number of government support measures, the issue is not closed. New home prices in China's 70 largest cities (excluding state-subsidized housing) fell 0.41% in September from the previous month, the biggest decline in 11 months.
A surprising reading from China – the second such case in 33 years
The reading that particularly surprised economists was the unexpected decline in investment in fixed assets. The category that includes real estate and infrastructure spending unexpectedly fell 0.5% in the first nine months of the year. Analysts polled by Reuters forecast an increase of 0.1%.
The deterioration of the indicator was mainly due to investments in real estate, which decreased by a total of 13.9% during 9 months of 2025. For comparison, in the period January – August the indicator was shrinking at a rate of 12.9%.
According to Wind Information data dating back to 1992, fixed asset investment fell in China only in 2020 during the pandemic. The latest reading showing a deterioration in this indicator is “rare and alarming,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said in a note, quoted by CNBC.
Strong industrial production and exports
China's industrial production rose 6.5% in September. This was a result well above the expectations of economists polled by Reuters, who expected a reading of 5%, and also higher than the August result, i.e. 5.2%. According to ING Chief Economist for the China region, Lynn Song, growth continued to be driven by external demand, highlighted by better-than-expected export data.
Despite the ongoing trade war, Chinese exports remained strong, growing 8.3% year-on-year in September, according to customs data released last week. The sharp decline in deliveries to the United States was offset by sales to other regions, including Southeast Asia.
Exports of permanent magnets made from rare earth metals to the US fell by 28.7% in September compared to August. This shows that Beijing was playing them even before the official announcement in October, when China announced the introduction of strict export controls on critical raw materials on which many global industries are based.
Prepared by Michał Misiura
