UOB Kay Hian
Date of Report: Monday, 18 August 2025
China’s Economic Slowdown Deepens Amid Trade War: July Data Signals Urgent Need for Stimulus
Introduction: China’s Growth Under Pressure
China’s economy faces mounting challenges as the effects of the ongoing trade war intensify. July’s economic data, released by UOB Kay Hian, reveals broad-based weakness across key sectors including industrial production, fixed asset investment, retail sales, and employment. The latest figures confirm downside risks and point to the urgent need for further fiscal support measures.
Industrial Production: Growth Falters, Key Sectors Slow
Industrial production growth decelerated sharply to 5.7% year-on-year (yoy) in July, falling short of consensus expectations of 6.0% and marking a notable drop from June’s robust 6.8%. The data highlights sectoral disparities:
- Railway, Ship, Aerospace & Transportation Equipment: Led growth at 13.7% yoy, remaining a bright spot.
- High-Tech Manufacturing: Slowed to 9.3% yoy, down 0.4 percentage points from June.
- Automobile Manufacturing: Weakened to 8.5% yoy, a sharp drop of 2.9 percentage points.
The slowdown marks a reversal from previous months, which benefitted from front-loaded overseas demand. With US companies having already raised inventory levels, further extensions of the trade truce may offer limited relief.
Retail Sales: Consumer Sentiment Sinks
Retail sales growth plunged to 3.7% yoy in July, missing consensus estimates of 4.6% and down from June’s 4.8%. This marks the lowest pace in 2025. Key details include:
- Goods Sales: Fell for the second consecutive month, registering 4.0% yoy (down 1.3 percentage points).
- Catering Revenue: Posted a slight improvement, rising 1.1% yoy (+0.2 percentage points).
Despite ongoing government subsidy schemes, deteriorating sentiment persists. New subsidies targeting interest payments on eligible personal consumer loans have been announced, which may help bolster consumer demand.
Fixed Asset Investment: Property Sector Drags Down Overall Growth
Fixed asset investment (FAI) continued its slide, with year-to-date (ytd) growth collapsing to just 1.6% yoy, well below the Bloomberg consensus of 2.7% and marking a 12-month low. The deceleration was driven by:
- Property FAI (ytd): Deteriorated further to -12.0% yoy, down 0.8 percentage points from June and reaching fresh 12-month lows.
- Overall FAI: Fell sharply, reflecting the persistent weakness in the property sector, which remains a major drag on economic activity despite improving supply dynamics.
Unemployment: Rising Joblessness Adds to Downside Risks
The surveyed urban unemployment rate edged higher to 5.2% in July, up from 5.0% in June, signaling increasing strain on the labor market. The report anticipates that more support policies will be rolled out as economic confidence remains fragile.
Key Economic Data Table: July 2025
| Indicator |
July 2025 |
Consensus |
June 2025 |
| FAI YTD (% yoy) |
1.6 |
2.7 |
2.8 |
| FAI (% yoy, UOB Estimate) |
-4.4 |
– |
-1.7 |
| Property FAI YTD (% yoy) |
-12.0 |
-11.4 |
-11.2 |
| Industrial Production (% yoy) |
5.7 |
6.0 |
6.8 |
| Surveyed Unemployment Rate (%) |
5.2 |
5.1 |
5.0 |
| Retail Sales (% yoy) |
3.7 |
4.6 |
4.8 |
Sector Charts: Visualizing the Downturn
Fixed Asset Investment Trends (Jan 2022 – May 2025):
- FAI (ytd % yoy), FAI Infrastructure (ytd), and Private FAI (ytd) all show declining momentum through 2025.
Industrial Production (Mar 2022 – Mar 2025):
- Growth rates steadily declined, reflecting weakening demand and sectoral headwinds.
Retail Sales (Mar 2022 – Mar 2025):
- Headline retail sales, goods, and catering revenue all display persistent softness, with headline figures turning negative at times.
Government Policy Response: Fiscal Support Expected
The weakening data underscores the need for additional government support. Announced measures include subsidies for interest payments on eligible consumer loans, which are expected to help stabilize consumption. However, with overall sentiment deteriorating, existing schemes may prove insufficient.
Conclusion: Outlook and Risks
China’s July economic data confirms a deepening slowdown driven by trade war repercussions, property sector weakness, and fragile consumer sentiment. Industrial production, retail sales, and investment all fell short of expectations, while unemployment ticked higher. Investors and analysts should anticipate further fiscal intervention as the government seeks to restore confidence and stabilize growth.
Contact Information
Disclosures & Regulatory Information
UOB Kay Hian Private Limited has prepared this report for informational purposes. The report is distributed in accordance with local laws and regulations in Singapore, Hong Kong, Indonesia, Malaysia, Thailand, the United Kingdom, and the United States. Please consult with UOB Kay Hian or its relevant local entity regarding any investment or regulatory questions.
Copyright Notice
Copyright 2025, UOB Kay Hian Pte Ltd. All rights reserved.
