China’s latest GDP growth rate quarter-on-quarter (QoQ) for Q3 2025 was reported at 1.10%, unchanged from Q2 2025 and above the consensus estimate of 0.80%, according to the Sigmanomics database. This marks a continuation of moderate expansion following a 1.20% print in Q2 and a peak of 1.60% in Q1 2025. The 12-month average growth rate stands near 1.10%, reflecting a steady but unspectacular pace.

Drivers this month

• Domestic consumption rebounded, contributing approximately 0.40 percentage points (pp) to growth.
• Industrial output growth slowed slightly but remained positive at 0.30 pp.
• Exports faced headwinds, subtracting 0.10 pp amid global demand softness.
• Infrastructure investment added 0.20 pp, supported by government stimulus.

Policy pulse

The People’s Bank of China (PBOC) maintained an accommodative stance, keeping benchmark lending rates steady. Inflation remains moderate at 2.30% YoY, below the central bank’s implicit target of 3%, allowing room for supportive monetary policy.

Market lens

Immediate reaction: The Chinese yuan (CNY) appreciated 0.30% against the US dollar within the first hour post-release, reflecting confidence in stable growth. The 2-year government bond yield edged down 5 basis points, signaling expectations of continued policy support.

Core macroeconomic indicators underpin the growth narrative. Industrial production rose 5.10% YoY in September 2025, slightly below the 5.30% average for the past year. Retail sales expanded 7.40% YoY, supported by pent-up consumer demand and easing COVID-19 restrictions. Fixed asset investment grew 5.80% YoY, driven by infrastructure and technology sectors.

Monetary policy & financial conditions

The PBOC’s steady policy rates and targeted liquidity injections have kept credit growth stable at 11.50% YoY. The broad money supply (M2) expanded 8.90% YoY, supporting domestic demand without overheating the economy.

Fiscal policy & government budget

Fiscal stimulus remains a key pillar. The government’s budget deficit target of 3.20% of GDP allows for increased infrastructure spending and social programs. Recent bond issuances totaling CNY 1.20 trillion have financed these efforts, sustaining growth momentum.

External shocks & geopolitical risks

Trade tensions with major partners and global supply chain disruptions continue to weigh on export growth. The ongoing geopolitical uncertainty in the Asia-Pacific region adds volatility to investor sentiment and trade flows.

Drivers this month

• Consumer spending: 0.40 pp
• Industrial output: 0.30 pp
• Infrastructure investment: 0.20 pp
• Net exports: -0.10 pp

Policy pulse

Monetary policy remains accommodative with stable benchmark rates and targeted credit easing. Inflation below target supports this stance, while fiscal spending sustains demand.

Market lens

Immediate reaction: The CNY strengthened 0.30% versus USD, 2-year yields declined 5 bps, and equity markets showed mild gains, reflecting investor confidence in steady growth.

Looking ahead, three scenarios frame China’s growth trajectory:

• Bullish (30% probability): Stronger global demand and successful domestic reforms push QoQ growth above 1.30%, supported by robust consumption and investment.
• Base (50% probability): Growth remains stable near 1.10%, balancing moderate external risks and steady policy support.
• Bearish (20% probability): Escalating geopolitical tensions and global slowdown reduce growth below 0.80%, with export contraction and investment pullback.

Structural & long-run trends

China’s economy is transitioning from investment-led to consumption-driven growth. Demographic shifts, technological innovation, and environmental policies will shape medium-term prospects. The government’s focus on high-tech industries and green energy aims to offset slowing traditional sectors.

Financial markets & sentiment

Market sentiment remains cautiously optimistic. Equity indices have stabilized after volatility in early 2025. The yuan’s moderate appreciation reflects confidence in policy continuity. Credit spreads remain tight, indicating manageable financial risks.

China’s Q3 2025 GDP growth rate of 1.10% QoQ signals a steady economic footing amid complex global and domestic challenges. While the pace is moderate, it reflects resilience supported by accommodative monetary policy and targeted fiscal stimulus. External risks and structural headwinds temper optimism, requiring vigilant policy calibration.

Investors and policymakers should monitor global demand trends, geopolitical developments, and domestic reform progress closely. The balance of risks suggests a cautious but constructive outlook for China’s near-term growth.