UBS Economics-China Economic Perspectives _China by the Numbers (September...-117833330

ab19 September 2025Global ResearchChina Economic PerspectivesChina by the Numbers (September 2025) Our guide to Chinese monthly dataWhat the numbers are, what they mean and the outlook going forward.Growth momentum weakened across the board in AugustDomestic activity weakened across the board in August, surprising the market to the downside again. Overall FAI growth declined by another 6.3% YoY, as infrastructure and manufacturing investment weakened, the latter partly affected by the anti-involution campaign. The property downturn deepened and housing prices fell further. Retail sales growth edged down to 3.4% YoY, as sales growth of products with trade-in subsidies decelerated further. Industrial production growth cooled to 5.2% YoY while service production index growth edged down to 5.6% YoY. Previously resilient export growth has begun to fade, easing to 4.4% YoY, with a deeper YoY decline in exports to the US. CPI fell into YoY deflation again (-0.4% YoY) on weak food prices, while PPI narrowed its YoY contraction due to a sequential increase of upstream prices and a low base. TSF credit growth edged down 0.2ppt to 8.8% YoY, as we expected, on weak bank loans and government bonds. (See our comments.)Further growth slowdown ahead in Q425 Growth weakness in July and August is likely to bring down Q3 GDP growth to 4.5-5% YoY (UBSe: 4.7%). We foresee further growth deceleration in Q4. Consumption growth may decelerate further on soft household income growth and a high base effect from trade-in subsidies. The property downturn may continue in the absence of major progress in inventory destocking. Export growth is set to decelerate further on payback of previous front-loading and expected global demand softness. Meanwhile, infrastructure and manufacturing investment may improve slightly from a surprising contraction in July-August. Overall, we still expect Q4 GDP growth to weaken to below 4% YoY and full-year 2025 growth to average 4.7%.Additional policy support neededGiven the softening activity in Q3 and more expected weakness in Q4, we believe additional policy support is needed. Recently, the Ministry of Finance announced it will bring forward next year's new local government debt quota to support the swap of LGFV debt. China is also reportedly mulling asking policy banks and SOE banks to provide financing to local governments for paying back corporate arrears (see Bloomberg news report and Caixin report). In our view, if the report is accurate, the related bank loans are likely to be granted to LGFVs (rather than directly to local governments) to facilitate their arrears payment to suppliers (see more in China Weekly and UBS sector note). In addition, the government announced various measures to support service consumption in early September, most of which still focused on unleashing supply side potential and increasing credit support.Future policy support likely data dependent and modest in scale We think the government may focus on deliveri