Economy

China’s Economy Stumbles: How August’s Slowdown Impacts Your Investments

China‘s economy slowed in August: Factory output and retail sales weakened, spurring stimulus calls.

September 15, 2025, 9:36 AM

The modern and iconic skyline of Shanghai's Lujiazui financial district with the Pearl Tower

The futuristic skyline of the Lujiazui financial district in Shanghai, with its distinctive skyscrapers along the Huangpu River. By MDL.

Executive Summary

China’s economic recovery significantly slowed in August, with industrial output (5.2%) and retail sales (3.4%) registering their weakest year-on-year growth since late 2024.

The slowdown is driven by underlying domestic pressures, including a wobbly job market (5.3% unemployment) and an ongoing property crisis (falling new home prices).

This deceleration is intensifying calls for Beijing to introduce further stimulus measures to meet its annual growth target, with economists concerned about potentially worsening indicators in Q4.

The Story So Far

China’s current economic slowdown, reflected in weak factory output and retail sales, stems primarily from persistent domestic challenges, including a wobbly job market that has seen unemployment rise to a six-month high and an ongoing property crisis marked by falling new home prices, both of which are significantly curbing internal demand and consumer confidence.

Why This Matters

China’s notable economic slowdown in August, evidenced by weak factory output, retail sales, and investment, highlights persistent challenges from a wobbly job market and an ongoing property crisis, intensifying pressure on Beijing to implement more substantial stimulus measures to meet its annual growth targets and mitigate a potential further deceleration that could have broader global economic implications.

Who Thinks What?

Many economists believe that Beijing needs to introduce further stimulus measures to address China’s economic slowdown, though they remain divided on the necessity and scope of such interventions.

Beijing is under pressure to introduce further stimulus measures to meet its annual growth target of “around 5%”, while also aiming to balance support without fueling new imbalances.

China’s economic recovery registered a notable slowdown in August, with both factory output and retail sales reporting their weakest year-on-year growth since late last year, intensifying calls for Beijing to introduce further stimulus measures. Industrial output expanded by 5.2%, a decline from July’s 5.7%, while retail sales grew by 3.4%, slowing from the previous month’s 3.7%, indicating a broad deceleration across key economic indicators.

August Economic Performance

The National Bureau of Statistics reported that industrial output growth of 5.2% in August marked the lowest reading since the same month in 2024. This figure fell short of economists’ expectations and represented a cooling from the 5.7% increase observed in July.

Retail sales also experienced a significant slowdown, expanding by only 3.4% in August. This pace was the slowest since November 2024, continuing a downward trend from the 3.7% rise recorded in the preceding month, reflecting subdued consumer demand.

Further exacerbating concerns, fixed-asset investment grew at a slower-than-expected pace of 0.5% year-on-year for the first eight months of the year. This indicates a lack of robust investment driving economic expansion.

Underlying Economic Pressures

The domestic economy continues to grapple with a wobbly job market and an ongoing property crisis, which are significantly curbing internal demand. These structural issues pose substantial challenges to sustainable growth.

Unemployment edged up to a six-month high of 5.3% in August, highlighting persistent difficulties in the labor market. A less secure employment outlook often translates into reduced consumer spending.

The real estate sector remains a significant drag, with new home prices falling 0.3% last month from July and 2.5% on an annual basis. The continued decline in property values impacts household wealth and confidence.

Policy Outlook and Future Concerns

Economists are currently divided on the necessity and scope of further stimulus required to meet China’s annual growth target of “around 5%.” The government faces a delicate balance in implementing support without fueling new imbalances.

Manufacturers are also awaiting more clarity regarding a potential U.S. trade deal, which introduces an element of external uncertainty into their planning. Global trade dynamics continue to influence China’s export-oriented sectors.

There are growing concerns that China’s main economic indicators could worsen over the fourth quarter of the year. This potential deterioration is largely attributed to challenging base effects from the previous year, which could make current growth figures appear less favorable.