• China's factory output growth hits an eight-month low in July, increasing economic challenges.
• Retail sales growth slows to 3.7%, the weakest since December 2024, missing forecasts.
• Analysts predict GDP growth will decline to 4.5% in Q3 and 4.0% in Q4 of 2025.
• Extreme weather events and global trade tensions contribute to the slowing economic momentum.
• Policy measures are being intensified to boost domestic consumption amidst these difficulties.

China's factory output growth slumped to an eight-month low in July, while retail sales also slowed sharply, reinforcing the challenge confronting policymakers as they strive to shore up the economy in the face of soft domestic demand and external risks. The National Bureau of Statistics (NBS) reported that industrial output grew by just 5.7% year-on-year in July, down from a 6.8% increase in June and missing a predicted rise of 5.9%, according to Reuters and Channel News Asia.

Simultaneously, retail sales—a crucial indicator of consumer spending—expanded only 3.7% in July, marking the slowest growth rate since December 2024, down from a 4.8% rise in the preceding month and falling short of forecasts for 4.6%, as reported by Reuters, The Jakarta Post, and Reuters.

Government officials are currently navigating pressures from multiple fronts—including U.S. President Donald Trump's trade policies, insufficient domestic demand, and excessive competition within the local market, affecting the overall economic landscape. Despite a temporary trade truce extended by another 90 days in mid-May to avoid returning to high U.S. tariff rates on Chinese goods, manufacturers' profits continue to struggle due to subdued demand and deflation in factory-gate prices, as emphasized by Reuters and Channel News Asia.

Analysts indicate that China's economy heavily relies on government support, suggesting that prior policy measures, which were "front-loaded" earlier in 2025, may have lost effectiveness. Xu Tianchen, a senior economist at the Economist Intelligence Unit, explains that while early measures provided some relief, enduring weak demand and global risks pose significant challenges to sustained growth, as pointed out by Reuters and The Jakarta Post.

Additional indicators reflect troubling economic conditions; fixed asset investment saw a mere 1.6% increase during the first seven months of 2025, compared to an expected rise of 2.7%, suggesting that firms may be utilizing existing capacity rather than expanding. Moreover, the nation’s property sector—a significant source of household wealth—continues to struggle with falling new home prices, which dropped 2.8% in July year-on-year, further dampening consumer confidence, according to Channel News Asia and Reuters.

The economic outlook remains uncertain, with recent polls projecting GDP growth to slow to 4.5% in the third quarter and down to 4.0% in the fourth. Analysts caution that achieving higher household expenditure will be difficult due to uncertainty over job security amidst persistent challenges from Trump's trade policies, predicting GDP growth for 2025 may fall to 4.6%—short of the government's goal of approximately 5%—and decline further to 4.2% by 2026, according to The Jakarta Post and Reuters.