China’s economic activity slowed more than anticipated for a second consecutive month, with a sharp decline in investment raising concerns that policymakers may need to introduce additional stimulus measures to keep growth aligned with the official target, according to data released Monday.
Production at factories and mines expanded by 5.2% in August compared to a year earlier, according to the National Bureau of Statistics (NBS). This figure fell short of both July’s 5.7% increase and the median forecast of a 5.6% rise from economists surveyed by Bloomberg. Retail sales growth also moderated, rising 3.4% year-on-year, below the expected 3.8% and down from 3.7% in July.
The most dramatic shift was in fixed-asset investment, which slowed sharply to just 0.5% growth in the first eight months of the year — the worst reading since 2020. Meanwhile, the surveyed urban unemployment rate climbed to 5.3%, highlighting mounting pressure on labor markets.
“The data confirms a sharp slowdown in the second half of 2025, especially on the investment side,” said Carlos Casanova, senior Asia economist at Union Bancaire Privée in Hong Kong.
China’s economy, which recorded a robust 5.3% growth in the first half of the year, is now showing signs of deceleration as exports cool amid escalating global trade tensions, particularly from U.S. tariffs imposed during Donald Trump’s second term. The International Monetary Fund’s July 2025 update forecasts modest global growth, with China’s slowdown having a disproportionate impact given its role as a key contributor to global expansion over the next five years.
Despite these headwinds, China’s leadership remains optimistic about meeting its annual growth target of around 5%, citing resilient exports. So far, policymakers have not unveiled major new stimulus plans, as export demand has so far buffered the economy. However, a series of disappointing data points — including slower credit expansion, weaker export performance (with export growth slipping to 4.4% in August), and declining labor market conditions — have fueled investor unease.
Further complicating the outlook is the government’s ongoing “anti-involution” campaign, aimed at curbing overcapacity and excessive competition across industries. Initiated in early July, this initiative is believed to have contributed to falling output in sectors such as steel and copper. While equity markets have responded positively in hopes that the campaign will enhance corporate profitability, analysts warn that without new stimulus, the measures could weigh on employment and consumer spending.
“The economy is generally stable,” the NBS stated, “but there are still plenty of instabilities and uncertainties with the external environment, and the economy still faces many risks and challenges.”
How China’s policymakers will navigate this uncertain environment remains unclear, with significant implications not only for the domestic economy but also for global markets closely tied to China’s growth trajectory.
