China’s economic growth slows to one-year low in Q3 amid trade war, property slump

BEIJING – China’s economic growth slowed to the weakest pace in a year in the third quarter as fragile domestic demand left it heavily reliant on manufacturing production and exports, stoking concerns about deepening structural imbalances.

The economy grew 4.8 per cent year on year in the July-to-September period, slowing from the 5.2 per cent pace in the second quarter but in line with a Reuters poll forecast.

For January to September, the economy expanded 5.2 per cent, National Bureau of Statistics data showed, suggesting full-year growth is on track to hit Beijing’s target of around 5 per cent.

“With China on track to hit this year’s growth target, we could see less policy urgency,” said Mr Lynn Song, chief economist for Greater China at ING.

“But weak confidence translating to soft consumption, investment, and a worsening property price downturn still need to be addressed,” he added.

Beijing may be using the headline resilience in growth as a show of strength in upcoming talks between Vice-Premier He Lifeng and US Treasury Secretary Scott Bessent in Malaysia this week, and a potential meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in South Korea later.

The recent export data also highlights

China’s ability to diversify away from the US market

, the world’s largest consumer economy. Its US export sales were down 27 per cent year on year in September, but shipments to the European Union, South-east Asia and Africa grew by 14 per cent, 15.6 per cent and 56.4 per cent respectively.

Still, the sluggish domestic market remains a drag for businesses, with Oct 20 data showing retail sales slowing to a 10-month low.

Trade rift highlights lopsided economy

Renewed trade tensions with Washington have highlighted the vulnerabilities of China’s lopsided economy, raising expectations that Chinese leaders may embrace painful changes to rebalance growth towards domestic consumption.

While China’s export growth rebounded in September, much of the recent data shows the world’s second-largest economy has lost momentum, and deflationary pressures have persisted despite efforts to curb overcapacity and fierce competition among businesses.

Moreover, manufacturers’ sales abroad to non-US countries come at the cost of profitability due to intense competition on price, making it hard to sustain unless trade tensions tone down.

Mr Jeremy Fang, a sales officer at a Chinese aluminium products maker, said his firm lost 20 per cent of revenue as higher sales in Latin America, Africa, South-east Asia, Turkey and the Middle East failed to fully offset an 80 per cent to 90 per cent order plunge in the US.

Mr Fang said he is learning Spanish to get ahead of his Chinese competitors rushing to non-US markets and is now travelling abroad twice more often than he did in 2024. But that extra effort is not enough.

“You have to be ruthlessly competitive on price,” Mr Fang said. “If your price is US$100 (S$130) and the customer starts bargaining, it’s better to drop US$10 to US$20 and take the order. You can’t hesitate.”

President Trump has threatened to raise tariffs on Chinese goods by an additional 100 per cent starting Nov 1. However, US officials have signalled that both countries are prepared to lower the temperature in their tariff spat.

China’s 5-year plan in focus

Chinese leaders will hold a closed-door meeting from Oct 20 to 23 to discuss, among other things, the country’s 15th five-year development plan, which is expected to prioritise high-tech manufacturing in the wake of the intensifying rivalry with the US.

Investors are also looking to a Politburo meeting and the Central Economic Work Conference, expected in December, for clues on economic policy for 2026.

The prolonged crisis in the property market, with latest figures showing investment in the sector down 13.9 per cent in the first three quarters year on year, has weighed heavily on growth and consumer confidence in China.

“I don’t think there will be additional consumption-focused stimulus. The focus of policy is long-term, including pension reform, which will improve consumption in the future but will reduce it more immediately due to layoffs and people having less cash in hand,” Ms Dan Wang, China director at Eurasia Group.

Separate September activity data, which was also released on Oct 20, showed that industrial output grew to a three-month high of 6.5 per cent year on year, accelerating from a 5.2 per cent increase in August.

Retail sales growth slowed to their weakest in 10 months at 3 per cent in September, from 3.4 per cent in August.

Fixed asset investment shrank 0.5 per cent in the first nine months compared with the same period in 2024, versus the 0.5 per cent growth in the January-to-August period. REUTERS