China’s economy showed surprising resilience in the third quarter of 2025, growing 1.1% compared to the previous quarter and maintaining a year-on-year expansion of 4.8%. But beneath the surface of these steady numbers lies a troubling trend: Chinese consumers are pulling back, spooked by a deepening housing crisis and shrinking household wealth.
China Economy Growth: Stable on Paper, Fragile in Practice
According to China’s National Bureau of Statistics, the China economy held its pace through July to September, defying some pessimistic forecasts. However, this stability was largely propped up by strong exports and aggressive factory investment—not by domestic demand. In fact, retail sales continue to falter as households tighten their belts.
“The property slump is weighing on retail sales, but further consumption-boosting measures are in the cards,” said Xu Sitao, chief China economist at Deloitte.
Housing Market Collapse Drags Down Household Confidence
Once a pillar of China’s economic engine, the real estate sector has become its Achilles’ heel. Apartment prices in major cities have plunged by as much as 40% since their 2021 peak. For many families, their home was their largest asset—now it’s a source of anxiety.
This erosion of wealth has led to a sharp drop in consumer spending. Even government subsidies for smartphones, electric vehicles, and appliances—designed to stimulate demand—have had limited impact, especially as cash-strapped local governments scale back their contributions to these programs.
Trade Surplus Soars, But Can’t Fix Everything
On the bright side, China’s trade surplus surged by 12.4% year-over-year in Q3 and is on track to exceed $1 trillion for the year—a new record. Exports to emerging markets like Brazil, Indonesia, and Turkey have boomed, even as shipments to the U.S. dip due to renewed tariffs under the Trump administration.
Yet this export-led strength hasn’t translated into stronger domestic consumption. Moreover, a growing number of countries are now following America’s lead, slapping tariffs on Chinese goods to protect local industries.
Manufacturing Overcapacity Raises New Alarms
While investment in new factories helped offset real estate losses earlier in the year, Beijing is now sounding the alarm over manufacturing overcapacity. Price wars and cutthroat competition have prompted state banks to slow lending for new industrial projects—a potential drag on future growth.
What’s Next for China’s Economic Policy?
The timing of the GDP release was notable: it coincided with the Chinese Communist Party’s Central Committee meeting, where leaders are reviewing the next Five-Year Plan (2026–2030). Analysts expect bold moves in the coming months.
Possible measures include:
- Boosting rural pensions (currently as low as $20/month)
- Direct cash transfers or consumption vouchers
- Renewed infrastructure spending led by the central government
“For local governments, it’s all about maintenance now—the construction has been left to the central government,” said Dan Wang, China economist at Eurasia Group.
Table: Key Q3 2025 Economic Indicators for China
| Indicator | Q3 2025 | Notes |
|---|---|---|
| Quarterly GDP Growth | +1.1% | Same as Q2 |
| Year-on-Year GDP | +4.8% | Slightly above expectations |
| Trade Surplus Growth | +12.4% | On pace for >$1T annual surplus |
| Housing Price Drop (vs. 2021 peak) | Up to -40% | Major cities affected |
Sources
The New York Times: China’s Economy Holds Steady, but Consumers Grow More Cautious
