Global Macro Research
GrowthChina: Industry does the heavy lifting
Chinese GDP growth was stronger than expected in Q3, helped by industrial production. In contrast, household demand remains soft, and investment is dragging on growth, which should at least spur further policy easing.
Authors
Michael Langham
Emerging Markets Economist
Robert Gilhooly
Senior Emerging Markets Economist
Duration: 1 Min
Date: 23 Oct 2025
Key Takeaways
- The authorities’ “around 5%” growth target for 2025 should be easily reached, but questions remain about momentum heading into 2026 and whether the nominal environment will recover.
- An acceleration of industrial production – which the NBS estimates expanded by 8% on a month-on-month annualised basis – appears to have helped confound expectations for a sequential slowdown in growth.
- It is however difficult to be confident in the other drivers that supported official GDP growth.
- Retail sales growth was unchanged (3% year on year) in September – consistent with only a moderate contribution from consumption and the tertiary sector.
- Headline fixed asset investment (FAI) growth has dropped to -0.5% year to date year on year – the only contraction outside of the pandemic shock. Sequential estimates can be volatile, but it is hard to conclude investment did not drag on the quarter.
- Financial conditions have tightened modestly through Q3 (-0.14 standard deviations), reflecting higher yields and a fading effect from the front-loading of government bond issuance.
A silver lining from these weak strands of growth and another below-consensus CPI print has been the recent rally in 10-year bond yields in October, which have dropped around 10bps. This should help loosen our China Financial Conditions Index (CFCI) in October, while recent steps to increase and bring forward local governments bond quotas should help support financial conditions.
