China’s economy grew by 4.8% year-on-year in Q3 2025, in line with market expectations. However, increasing disparities across sectors suggest a risk of deeper slowdown ahead, particularly as industrial production and exports weaken, according to UOB Group FX analysts Quek Ser Leang and Peter Chia.
Q3 GDP Moderation Highlights Uneven Growth
Consumption and net exports contributed 2.7 and 1.2 percentage points, respectively, matching Q2 levels. In contrast, gross capital formation dropped to 0.9 ppt, down from 1.3 ppt in Q2, as investment slowed amid a more uncertain economic outlook.
Despite this, UOB now expects China’s real GDP to grow by 5.0% in 2025, slightly above its previous forecast of 4.9%. To meet this target, Q4 2025 only needs to achieve a 4.5% growth rate. However, analysts caution that 2026 will be more challenging, with the delayed impact of new U.S. tariffs likely to weigh on growth. UOB maintains its 2026 GDP forecast at 4.2%.
Policy Outlook: Accommodative Stance to Continue
In October, both the 1-year and 5-year Loan Prime Rates (LPR) were left unchanged. Analysts expect the People’s Bank of China (PBOC) to maintain an accommodative monetary policy in response to renewed risks from the US-China trade tensions and ongoing domestic deflationary pressures.
UOB sees scope for a 10-basis point policy rate cut before year-end, alongside a possible 50-bps reduction in the Reserve Requirement Ratio (RRR) to support liquidity, bond issuance, and equity market flows.
Looking Ahead: Policy Planning Underway
Key discussions on China’s 15th Five-Year Plan (2026–2030) are expected to emerge during the Fourth Plenum (Oct 20–23), with full details to be released during the National People’s Congress (NPC) in March 2026.