The Chinese economy grew at its slowest annual pace in a year during the July-September quarter, growing 4.8%, in line with analyst expectations, as quoted on CNBC. The slowdown was caused by trade tensions with the United States and weak domestic demand.
This marks the weakest quarterly growth since the third quarter of 2024 compared with 5.2% in the previous quarter, according to government data released on Oct. 20, 2025, per Associated Press, as quoted on Yahoo Finance.
Trade Tensions & Export Data
Despite higher U.S. tariffs imposed by President Donald Trump, China’s overall exports have remained resilient as companies found new markets abroad. In September, exports to the United States fell 27% year on year, while global exports climbed 8.3% — the fastest growth in six months.
Property Sector & Consumer Weakness
China continues to grapple with a prolonged property market crisis, weighing on consumption and domestic demand. Residential property sales dropped 7.6% by value in the first nine months of the year compared with 2024.
Ratings agency S&P projects new home sales to decline another 8% year over year in 2025 and 6-7% in 2026, per the same Associated Press article. Meanwhile, Chinese authorities have taken efforts to curb steep price wars in industries, wherein excess capacity has caused competitive pressure.
Will China Cut Rates to Boost Economy?
To boost a slowing economy, China may opt for a policy easing in the near term. China’s central bank appears to be easing its monetary stance in the fourth quarter, according to Goldman Sachs, as economic momentum slows and policymakers face rising pressure to fuel growth, as quoted in the South China Morning Post.
In late September, the South China Morning Post article went on to mention that Goldman Sachs’ forecast for policy easing includes a 10-basis-point key rate cut and a 50-basis-point reduction in the reserve requirement ratio. Note that the economy has been facing deflationary pressure, which can be handled by monetary policy easing.
What Lies Ahead?
While China’s economy can meet its 5% growth target for 2025, supported by selective stimulus; weaker domestic demand, a struggling real estate sector and global uncertainties are negatives. The World Bank predicts China’s economy to expand 4.8% this year (quoted on CNBC) while S&P Global economists recently projected China’s GDP growth to slip to 4% year on year in the second half of 2025, after rising 5.3% in the first half, as quoted on South China Morning Post.
ETFs in Focus
If China cuts rates ahead, high-growth tech stocks and exchange-traded funds (“ETFs”) may gain. These include the likes of KraneShares CSI China Internet ETF KWEB and Invesco China Technology ETF CQQQ.
iShares China Large-Cap ETF FXI (heavy on Consumer Discretionary and Financials) and iShares MSCI China ETF MCHI (heavy on Consumer Discretionary and Communications) should also advance if a policy easing happens.
Note that although China’s retail sales momentum has been subdued, FXI and MCHI have advanced about 23% and 28%, respectively, over the past six months (as of Oct. 17, 2025). Both funds have declined 1.6% and 1.7% over the past month. Any policy stimulus should boost these funds.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares China Large-Cap ETF (FXI): ETF Research Reports Invesco China Technology ETF (CQQQ): ETF Research Reports iShares MSCI China ETF (MCHI): ETF Research Reports KraneShares CSI China Internet ETF (KWEB): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
