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China’s economy expanded at a slower pace in the third quarter of 2025 despite stronger-than-expected GDP data, as weakening domestic demand and persistent disinflation continued to pressure overall momentum. Analysts from BofA Securities said resilient exports helped bolster growth between July and September, partly offsetting a “clear softening” in consumer activity and private investment since June. They added that recent economic readings reinforce their outlook that China will “muddle through” without urgent or aggressive policy stimulus from Beijing.
Official data showed China’s GDP grew 4.8% year-on-year in Q3, slightly above expectations of 4.7% but marking the slowest pace in a year. The figure was down from 5.2% in the previous quarter. On a quarterly basis, the economy expanded 1.1%, beating forecasts but still reflecting the impact of U.S.–China trade tensions, prolonged deflationary pressures, and a weakened property sector.
Exports and manufacturing remained China’s primary growth engines, even as consumer spending lost steam and private sector confidence dipped. While Beijing has rolled out several stimulus measures in recent quarters, the boost from these policies appears to be fading. Year-to-date GDP now stands at 5.2%, just above the country’s 5% growth target.
September data offered some silver linings, with industrial production and retail sales outperforming expectations. The unemployment rate also unexpectedly slipped to 5.2%. However, fixed asset investment recorded a 0.5% contraction — its first monthly decline since the early pandemic period in 2020 — signaling ongoing caution among businesses.
Despite lingering economic challenges, BofA analysts noted improved sentiment surrounding trade after last month’s agreement between U.S. President Donald Trump and President Xi Jinping. They said this shift could tilt risks “to the upside,” prompting the bank to revise its growth forecasts to 5% for 2025, 4.7% for 2026, and 4.5% for 2027 — upgrades from earlier estimates.
