China’s economic recovery is showing mixed signals, with manufacturing output rising modestly but consumer spending lagging behind expectations

Mixed Signals in China’s Economic Recovery – Manufacturing Gains Amid Consumer Spending Slump

As Asia’s largest economy, China’s post-pandemic recovery continues to unfold with a complex blend of resilience and fragility.

Recent data from the third quarter of 2025 paints a nuanced picture of progress, revealing modest gains in manufacturing output while consumer spending remains subdued, casting a shadow over broader economic momentum.

China’s gross domestic product (GDP) grew by 4.8 percent year-on-year in Q3 2025, a figure that aligns with the government’s annual target of “around 5 percent” but marks the slowest pace in a year. This deceleration underscores the challenges Beijing faces in sustaining growth amid persistent structural headwinds. High-tech manufacturing and a widening trade surplus have emerged as key pillars supporting the economy, bolstered by export front-loading and industrial investment initiatives.

However, domestic demand tells a different story. Nominal GDP rose only 3.7 percent year-on-year, signaling weak pricing power and pressure on corporate profits, wages, and fiscal revenues.

The property sector downturn continues to weigh heavily on consumer sentiment, with household consumption failing to rebound as expected despite government stimulus measures such as equipment upgrades and consumer goods trade-in programs.

Compounding these challenges is the Chinese leadership’s strategic pivot toward industrial self-reliance. At the Fourth Plenum meeting, senior Communist Party officials unveiled a five-year roadmap prioritizing manufacturing and technological advancement over consumer-driven growth. This policy direction reflects a broader shift toward state-led industrial expansion, even as domestic consumption struggles to regain traction.

Trade tensions and global uncertainties further complicate the recovery. Tariffs imposed by major trading partners, particularly the United States, have disrupted traditional export channels, prompting manufacturers to relocate production to Southeast Asia. These shifts, while supporting some sectors, have not translated into a robust domestic demand cycle.

In summary, China’s economic recovery in 2025 is marked by a duality: manufacturing and industrial investment are showing signs of life, yet consumer spending remains a critical weak link.

The government’s emphasis on technological self-reliance and industrial modernization may yield long-term benefits, but in the short term, the lack of consumer confidence and persistent property market woes continue to temper the recovery’s pace and breadth.