China’s economy slowed sharply in July as factory production, retail spending and fixed-asset investment all grew below expectations.
Data from the National Bureau of Statistics on Friday showed industrial output rose 5.7% year-on-year, the slowest pace since November 2024 and below June’s 6.8% growth. Retail sales increased by 3.7%, down from 4.8% in June, marking the weakest reading so far this year.
Fixed-asset investment for the first seven months of 2025 expanded 1.6%, reflecting a deepening contraction in the property sector.
The urban unemployment rate climbed to 5.2%, exceeding market expectations. Analysts say the across-the-board slowdown underscores the combined impact of Beijing’s crackdown on destructive price wars, spillovers from U.S. tariffs introduced by the Trump administration, and seasonal weakness exacerbated by extreme weather.
Investment weakness was pronounced across manufacturing, property, and infrastructure — a rare simultaneous contraction — as local governments tightened controls on sectors facing overcapacity.
BNP Paribas Chief China Economist Jacqueline Rong noted that this curtailment of new investment was aimed at reducing “involution” but risked further slowing economic activity.
Growth in consumer demand was also uneven. Car sales dropped 1.5% year-on-year, the first decline since early 2025, while purchases of household electronics, office supplies, and furniture softened.
Some local subsidy programs for consumer purchases faced funding shortfalls in June before additional central government support was provided in late July.
Beijing has so far avoided large-scale stimulus, signalling it will continue with planned supportive measures while keeping further interventions in reserve.
Economists say weaker-than-expected August data could prompt fresh support as early as late September.
Standard Chartered analyst Ding Shuang suggested expanding the trade-in subsidy programme to cover more goods and services to counter the slowdown.
Despite the loss of momentum, the government maintains its 2025 growth target of around 5%, with officials citing resilience in the face of a complex global environment and domestic challenges.
However, private capital expenditure fell 1.5% in the first seven months, the sharpest decline since September 2020, signalling persistent caution among businesses.
Market reaction to the data was mixed. The offshore yuan held steady, the yield on China’s 10-year government bonds edged lower, and the Hang Seng China Enterprises Index fell as much as 1.5% before paring losses.
The CSI 300 Index fluctuated between small gains and losses before ending the morning session 0.5% higher.
Analysts at Credit Agricole CIB warned that upcoming data could show an even faster pace of slowdown in the coming months if current demand and investment trends persist, adding to pressure on policymakers to fine-tune their economic strategy before year-end.
