China's factories are booming, but a deepening real estate slump is weighing on the country's economic growth
Cheng Xin/Getty Images
China’s economy grew 4.8% in the third quarter, roughly as expected — yet marking its weakest expansion in a year. It’s also a signal of deeper difficulty. Amid the realignment of global trade policy, China has been pivoting to a new growth model, focusing more on consumer spending and less on exports and building.
These latest numbers, which come in below Beijing's rumored target of 5% growth, suggest the pivot may be proving harder than leaders expected.
The slowdown from 5.2% in the previous quarter was driven by a surprising drop in fixed-asset investment — or aggregate spending on infrastructure, factories, and real estate — which fell 0.5% in the first nine months of 2025, the first contraction of its kind since the pandemic year of 2020.
China’s real estate sector has been mired in a multiyear slump that has erased trillions in household wealth and, in turn, paralyzed local governments. In the past, rising investment in factories and infrastructure was enough to offset the property downturn and keep the broader economy expanding. But that cushion appears to be fading. In the most recent quarter, property investment plunged nearly 14%, dragging down the overall figures.
Industrial production rose a better-than-expected 6.5% in September, highlighting China’s still-formidable factory output. But it's not quite enough to provide the usual boost. The shifting balance points to the difficulty of China’s pivot to a more consumer-led economy.
The news comes even as China looks to be emerging as the winner of the ongoing trade war with President Donald Trump. As Quartz reported last week, Chinese exports to the U.S. have plunged 27% as a result of Trump's tariffs, but shipments to the E.U., Southeast Asia, and Africa have rocketed by double digits, making up the difference. This diversification in exports is helping China’s manufacturing sector stay on strong footing.
Still, analysts say that a diversified export strategy isn’t enough to keep the whole economy humming — at least not humming in line with pre-pandemic growth numbers. Beijing still has an “investment gap” it needs to meet with spending in other sectors, while it continues to cultivate new export partners and pathways.
For Washington, the numbers may offer an uncomfortable lesson: the trade war may well be inflicting pain, but it’s also accelerating China’s decoupling. A slower China is still a huge one. And increasingly, it’s a China less dependent on American demand and less susceptible to U.S. action.
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