China Growth Wobbles as Trade Talks and Policy Support Take Center Stage
By Bob Mason
Published: September 16, 2025, 01:23 GMT+00:00
China’s economy shows weakness amid tough trade talks and domestic tests. New data and market signs report lower growth, higher costs, and weaker spending. This news brings more calls for clear fiscal actions to support the world’s second-largest economy.
Economic Growth Hits Speed Bumps
China’s industrial output grew 5.2% in August compared to last year. This growth falls from July’s 5.7% mark and a high of 7.7% in March. Tariffs and soft demand work together to slow down manufacturing. Lower output growth makes firms worry about profit ties and may slow the whole economy.
Margin Squeezes and Rising Unemployment
Surveys from the manufacturing and services groups show sharp changes. Rising costs force private companies to cut prices and thin their profit margins. To handle these costs, many companies cut jobs. This push raised the unemployment rate from 5.2% in July to 5.3% in August.
Young workers suffer most in this struggle. Youth unemployment climbed from 14.5% in June to 17.8% in July. This gap adds to job challenges and demands clear policies to boost new work chances.
Consumption Slumps Amid Economic Pressures
Higher unemployment and dropping house prices work to slow private spending. Retail sales growth fell from 6.4% in March to 3.4% in August. With less money in hand, consumers spend less and feel less sure.
This trend puts Beijing’s 5% GDP goal at risk. Falling house prices hurt consumer trust. Policy moves to steady the housing market and spur job creation, especially for young workers, are now vital.
Urgent Calls for Targeted Fiscal Stimulus
Experts at Goldman Sachs ask for more focused easing measures. They point to weak local demand and ongoing soft areas in the labor and property sectors. Floods in early August, limits on construction ahead of a military parade, a falling property market, and strict moves against price fights add pressure to the economy.
Trade Talks Under Pressure
China faces these issues as trade talks happen in Madrid. The United States, European Union, and Mexico press hard on tariffs. Such moves may slow down China’s export boost. For example, Mexico plans to place a 50% tariff on auto imports. This change adds to the hurdles for Chinese sellers.
US Treasury Secretary Scott Bessent mentioned that the US-China tariff break could stretch 90 more days before the November 10 end date. He noted the firmness of Chinese negotiators. At the same time, China’s trade chief Li Chenggang showed progress on a TikTok agreement yet said China stands firm on its business interests.
A high-level call between US President Trump and Chinese President Xi Jinping set for September 19 may shift talks. A key point is whether Beijing will cut down on Russian oil buys in return for tariff help. This idea came after a Shanghai Cooperation Organization meet. Even if Beijing keeps its foreign view strong, a little opening in stance is not ruled out.
Policy Initiatives and Market Response
Inside the country, China moves to boost the service scene and fix market gaps. President Xi Jinping wrote an article urging efforts to join the national market, stop low-price fights, close old factories, and fix tax and loan laws. These shifts aim to clear up market issues, fuel fair fights, and push a spending-based growth plan.
Even with these tests, Chinese stock markets show strength. The CSI 300 and Shanghai Composite indices have both risen about 15%, following a rise similar to the Nasdaq Composite. The Hang Seng Index has soared by 31.8% this year, showing high interest in China stocks.
Trade tensions, a weak housing scene, and soft demand still trouble investors. Continued tariff fights and a slower economy may cause more job cuts and less spending. This trend could weigh on risk assets soon.
Looking Ahead
As China deals with these hard tests, policy makers feel pressure to add fiscal and monetary support while handling trade ties in a changing worldwide scene. The results from trade talks, efforts to steady the housing market, and steps to boost work and spending will shape China’s pace in the months to come.
The situation remains a key watch for global markets and policy makers. Observers keep a close eye on shifts in trade rules and Beijing’s home reforms in the days ahead.
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