China’s economy expanded by 1.1 percent in the third quarter compared to the previous one, maintaining the same pace as in the spring, according to official data. If this rate holds, annual growth could reach about 4.1 percent. While such figures suggest resilience, they conceal mounting pressures within the domestic market, particularly in real estate and consumer spending.
Apartment prices have fallen by up to 40 percent in many cities since their 2021 peak, wiping out household savings and consumer confidence. Once a pillar of national wealth, the property sector has now become a drag on growth. Construction and real estate, previously accounting for roughly one-quarter of the economy, continue to contract. The central government’s response—subsidies to encourage purchases of domestic goods such as electric cars and smartphones—has offered limited relief. Local governments, burdened with debt and reduced land-sale revenues, are cutting back on these programs.
Retail sales reflected this hesitation. September’s 3 percent year-over-year increase marked the weakest growth in nearly a year, echoing November 2024 levels. Despite continued factory investment, authorities have grown concerned about overcapacity and price wars across key manufacturing sectors. The once-booming industrial expansion that helped offset consumer weakness is beginning to show cracks of its own.
Still, exports remain China’s strongest economic engine. The trade surplus grew by 12.4 percent compared with the same period last year, positioning the country to exceed $1 trillion in surplus for 2025—its highest ever. While exports to the United States have dipped due to tariffs, shipments to developing nations have surged. Much of this output supports foreign infrastructure projects and solar farms, strengthening China’s influence abroad even as domestic spending slows.
Yet, signs of strain are visible. Several emerging economies, including Brazil, Turkey, and Indonesia, have begun adopting protectionist measures mirroring U.S. tariffs to shield their industries. Beijing faces a growing dilemma: sustaining exports without igniting trade disputes while also reviving consumer confidence at home.
Part 2 will examine how Beijing may balance its investment-driven growth model with policies aimed at restoring consumer trust—and whether new measures from the Communist Party’s Central Committee can steer the economy toward genuine stability.