Economic Slowdown in August Raises Uncertainty About China’s Growth Target

China recorded their slowest growth in factory output and retail sales since last year in August, increasing pressure on Beijing to introduce more stimulus to prevent a sharp economic slowdown. 

The weak data has divided economists on whether additional short-term fiscal measures are needed to meet the annual growth target of “around 5%,” as manufacturers await clarity on a U.S. trade deal and domestic demand remains constrained by a shaky job market and ongoing property crisis. 

Industrial output rose 5.2% year-on-year, the lowest since August 2024, down from July’s 5.7% and below Reuters poll expectations of 5.7%.

Retail sales, a gauge of consumption, expanded 3.4% in August, the slowest pace since November 2024, and cooling from a 3.7% rise in the previous month. They missed a forecast gain of 3.9%.

“The strong start to the year still keeps this year’s growth targets within reach, but similar to where we were at this time last year, further stimulus support could be needed to ensure a strong finish to the year,” said Lynn Song, chief economist, Greater China at ING.

“While it is too early to gauge the impact of the consumer loan subsidies coming into effect in September, it is likely that more policy support is still needed, given the broader slowdown across the board. We continue to see a high possibility for another 10bp rate cut and 50bp RRR cut in the coming weeks.”

Reuters