China's Economic Growth Declines to 4.8% Amid US-China Trade Tensions and Domestic Consumption Challenges

Top Chinese and US trade officials are set to hold in-person discussions later this month as China's economic growth falls below five percent in the third quarter of 2025.

Official data released Monday revealed China's economic growth has decelerated to 4.8 percent year-on-year in the July-September quarter, marking the slowest pace in a year amid escalating trade tensions and persistent domestic consumption challenges.

This economic report emerged just hours before Xinhua news agency announced the commencement of a significant four-day meeting in Beijing, where top Communist Party officials will focus on long-term economic planning.

The timing is particularly noteworthy as it precedes scheduled discussions between senior Chinese and US trade representatives, with a potential meeting between Presidents Donald Trump and Xi Jinping on the horizon.

Earlier this month, Trump threatened to impose severe 100 percent tariffs on Chinese imports starting November 1, responding to Beijing's comprehensive export restrictions in the critical rare earths sector.

According to the National Bureau of Statistics (NBS), the third-quarter GDP growth of 4.8 percent represents a decline from 5.2 percent in the previous quarter, aligning with analysts' forecasts compiled by AFP. This figure matches the slowest growth rate since the same quarter last year, when the economy expanded by 4.6 percent.

As trade pressures mount, experts emphasize that China must transition toward a growth model more heavily reliant on domestic household spending rather than exports and manufacturing.

The data also showed that fixed-asset investment in the first three quarters experienced a slight 0.5 percent year-on-year decrease, primarily due to a significant contraction in real estate investment.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, characterized this decline as "rare and alarming," though he noted recent stimulus measures "should help to mitigate the downward pressure on investment" in the fourth quarter.

Nevertheless, Zhang cautioned that "the risk to GDP growth in Q4 is likely on the downside."

Consumer spending has remained sluggish in recent years, failing to fully recover from the COVID-19 pandemic that severely impacted consumer confidence.

Further indicating economic weakness, retail sales growth slowed to three percent year-on-year in September, consistent with Bloomberg survey estimates but lower than August figures and representing the slowest rate since November.

Julian Evans-Pritchard of Capital Economics explained: "This slowdown reflects the waning impact of the consumer goods trade-in scheme, which had boosted sales of certain products earlier in the year."

He added, "China's growth is becoming increasingly dependent on exports, which are offsetting a slowdown in domestic demand," warning that "this pattern of development is not sustainable."

Economic planners also face ongoing challenges from a prolonged debt crisis in China's extensive real estate sector, traditionally a key economic driver.

NBS data released Monday revealed that new residential property prices fell year-on-year in September across 61 of 70 surveyed cities, indicating persistent homebuyer caution.

One positive indicator emerged as industrial production rose by 6.5 percent last month, exceeding the five percent forecast in Bloomberg's survey.

The NBS stated that "the national economy withstood pressure and continued to maintain steady progress" during the first three quarters of the year.

Beijing and Washington agreed over the weekend to conduct fresh trade talks this week as leaders attempt to de-escalate tensions and avoid another damaging cycle of retaliatory tariffs.

Fears of a full-scale trade war eased somewhat after Trump told Fox News that 100 percent levies on all Chinese goods were "not sustainable."

Attention now turns to potential outcomes from the Communist Party meeting scheduled to conclude in Beijing on Thursday.

This fourth "plenum" during the current Central Committee's 2022-2027 term will concentrate on proposals for the 15th five-year plan for economic and social development, covering 2026-2030, which will be instrumental in advancing Xi's core objectives including technological self-sufficiency and military and economic strength.