China’s Q3 GDP growth slowed to 4.8% (vs 5.2% in Q2 and 5.4% in Q1), with exports remaining strong and subdued domestic demand. Despite its chronic imbalances, China is expected to reach its 2025 GDP growth objective of “around 5%.”

Whilst still in line with market expectations, China’s GDP growth has lost momentum after a strong start to the year, pressured by US trade tensions, a prolonged property slump, and soft consumer demand. The Q3 numbers indicate that the fundamentals of the Chinese economy remain relatively unchanged. Domestic consumption remains weak, with retail sales up 3.0% y-o-y in September, down from 3.4% in August and marking the lowest expansion since August 2024. Fixed-asset investment shrank by 0.5% y-o-y in the first nine months of the year, whilst investments in the property sector dropped by 13.9% during the same period, weighing on growth and consumer confidence.

However, industrial production remains strong, increasing by 6.5% y-o-y in September (from 5.2% in August), sustained by robust exports, as China has been able to diversify its markets away from the USA. The September numbers showed that exports to the USA were down 27% y-o-y, whereas shipments to the European Union, Southeast Asia, and Africa grew 14%, 15.6%, and 56.4%, respectively.

Another feature of the Chinese economy is its persistent deflationary trend. This trend is illustrated by China’s Q3 nominal GDP growth of 3.7%—its lowest reading since the end of 2022. Excess capacity, involution, and insufficient domestic consumption are topics that will be discussed at this week’s Fourth Plenum, with the core agenda being the formulation of the blueprint for China’s next Five-Year Plan (5YP).

Project Blue believes that artificial intelligence and technology, green development, and addressing economic imbalances will be the key topics of discussion. Amid increasing tensions with the USA, China is also likely to focus on expanding its presence in Africa, Latin America, and the Middle East through the Belt and Road Initiative.

Project Blue also believes that the next 5YP will mark a break compared to previous versions. By focusing more on qualitative rather than quantitative parameters, China is entering into its post-industrialisation phase. Therefore, Project Blue’s 2025 GDP growth forecast remains unchanged at 4.9%, although acknowledging potential upside, before slowing to 4.7% in 2026.