China’s economy showed more signs of slowing down last month, as it faces pressure from both international trade issues and problems at home.

Recent data shows that factory production and consumer spending are growing at their slowest pace in nearly a year. Factory output increased by 5.2% in August, down from 5.7% in July. Retail sales, which show how much people are spending, rose by just 3.4% the weakest growth since November 2024.

Several factors are contributing to this slowdown. Trade tensions with the United States, led by Donald Trump’s tariff policies, have hurt China’s export sector. Even though the two countries agreed to pause tariffs until November, exports to the U.S. still dropped by more than 33% in August.

At the same time, China’s property market is facing serious trouble. Big developers like Evergrande are struggling with debt, and home prices continue to fall. As a result, Chinese families are feeling less wealthy and are spending less. Unemployment is also rising, reaching 5.3% in August the highest in six months.

Factory production has also been disrupted by extreme weather, including the hottest summer since 1961 and the longest rainy season in decades. This has made it harder for factories to maintain output.

To cope with the impact of falling U.S. demand, Chinese manufacturers have started selling more goods to countries in Southeast Asia, Africa, and Latin America. While this shift is helping, it hasn’t fully made up for the loss in U.S. trade.

Economists are divided on what the government should do next. Some believe China needs to introduce more stimulus measures such as cutting interest rates or increasing government spending to keep its economy on track. Others think the slowdown isn’t serious enough yet to justify major intervention.

Consumer loan subsidies began in September, but experts say it might take more to boost confidence and spending. Business conditions remain uncertain, and many companies are holding back investment.

Meanwhile, home prices fell by 0.3% in August compared to July, and by 2.5% over the past year. This has made consumers even more cautious, especially as businesses face restrictions on aggressive price cuts, which may make domestic demand appear weaker than it is.

Overall, while China’s economy is still growing, it is clearly losing momentum. Whether or not the government chooses to step in with more support in the coming months will be key to reaching its 5% growth target for the year.

Source: The Guardian