China’s economic growth loses steam in July as domestic demand weakens

China’s economy showed clear signs of strain in July, with key indicators slowing amid weak domestic consumption, persistent property sector woes, and global trade headwinds. Data from the National Bureau of Statistics (NBS) on August 15 showed industrial output rose 5.7 per cent year-on-year, down from 6.8 per cent in June and marking the slowest pace since November 2024. The reading missed analysts’ forecasts for a 5.9 per cent gain. Retail sales, a key measure of household spending, expanded just 3.7 per cent in July from a year earlier, cooling from June’s 4.8 per cent rise and falling short of a Reuters poll forecast of 4.6 per cent.

The figure was the weakest since December 2024, underlining consumer caution despite Beijing’s efforts to boost spending through subsidies and trade-in programmes. Fixed-asset investment for January-July grew only 1.6 per cent year-on-year, missing expectations for 2.7 per cent and slowing from 2.8 per cent in the first half of 2025. Property investment slumped 12 per cent in the same period, extending a multi-year downturn in a sector that remains a major driver of household wealth.

Policy support fading, risks mounting

Economists said the July slowdown was partly expected, as factors that buoyed growth in the first half of 2025—such as front-loaded government stimulus and pre-emptive export shipments during the US-China tariff truce—are now fading. The Politburo has made boosting domestic consumption a priority this year, funnelling hundreds of billions of yuan into appliance trade-in programmes and new service industries. Yet some provinces have already suspended certain subsidies due to depleted funds.

While total exports surged 7.2 per cent in July, helped by rising shipments to Africa and Europe and a surge in chip sales, weak household spending remains a drag on growth. The urban unemployment rate edged up to 5.2 per cent in July from 5 per cent in June, while the jobless rate for 16-24-year-olds (excluding students) has stayed above 14 per cent for a year, underscoring labour market strains.

Trade truce buys time, but core disputes persist

On the global front, Beijing and Washington this week extended their tariff pause for another 90 days until mid-November, averting a spike in duties. However, analysts caution that deep disagreements over technology access, critical minerals, and industrial policy remain unresolved. Some analysts said that the big political trade-offs are likely being reserved for a potential summit between US President Donald Trump and Chinese President Xi Jinping later this year.

A Reuters poll projects China’s GDP growth to slow to 4.5 per cent in the third quarter and 4.0 per cent in the fourth, putting the official 2025 growth target of “around 5 per cent” at risk. Economists warn that without fresh stimulus, the combination of property market weakness, consumer caution, and external shocks could see full-year growth undershoot forecasts, with momentum slipping further into 2026.

(With inputs from agencies)