China’s Economy Posts Another Sharp Slowdown as Investment Reels
China’s economic activity slowed more than expected across the board with a sharp slump in investment, adding to the likelihood that policymakers will roll out more stimulus to ensure growth stays on track to hit the official target.
Production at Chinese factories and mines expanded 5.2% last month from a year earlier, according to data released by the National Bureau of Statistics on Monday, compared with July’s gain of 5.7%. The median forecast of economists in a Bloomberg survey was for an increase of 5.6%.
Retail sales grew 3.4% on year in August, slower than an expectation for an increase of 3.8% and down from 3.7% in the previous month.
Expansion in fixed-asset investment in the first eight months of the year decelerated sharply to 0.5%. The surveyed urban unemployment rate deteriorated to 5.3%.
With a boom in exports cooling off, many analysts and investors expect a downshift in China’s economy during the final months of 2025 after it clocked growth of 5.3% in the first half. The extent of the deceleration in China, set to be the top contributor to global growth over the next five years, will matter to a vulnerable world economy that’s slowing under pressure from Donald Trump’s tariffs.
The economy’s surprisingly upbeat performance in the first half of the year has left China’s leadership confident of reaching the official growth target of around 5% even in case of a relatively pronounced slowdown later in the year. So far, policymakers have shown little sign of preparing major new stimulus as exports prove resilient during Trump’s second trade war.
Yet new challenges are emerging, as evidenced by a series of disappointing data readings in recent weeks.
A broad measure of credit slowed last month for the first time this year, while export growth fell short of forecasts and dropped to 4.4% in August. The labor market also likely weakened in recent months, based on purchasing managers’ index surveys and private polls.
Another source of pressure for the economy is the government’s “anti-involution” campaign that aims to ease overcapacity and excessive competition among companies. The effort escalated in early July and may have contributed to a fall in output that month for products ranging from steel to copper.
Even though traders have pushed equities higher in anticipation that the measures will restore profitability across the economy, the government still risks hurting employment and consumption in the absence of a major stimulus package for demand.
How the campaign unfolds remains highly uncertain, making it difficult to judge when China might be able to break the grip of entrenched deflation.
Source : Bloomberg
