By Kevin Yao
BEIJING (Reuters) -China’s economy likely grew at its weakest pace in a year in the third quarter, with the slowdown set to deepen and threaten the official growth target, a Reuters poll showed, raising pressure for fresh stimulus as a trade war with the U.S. saps confidence.
Beijing has rolled out modest support measures this year to preserve policy space for future shocks, taking advantage of resilient exports and strong stock markets, but renewed U.S.-China trade tensions pose risks to the outlook.
Gross domestic product growth in July-September is forecast at 4.8% year-on-year, the slowest pace since the third quarter of 2024, and down from the 5.2% rate clocked in the second quarter, a Reuters poll of 45 economists showed.
The projected reading would still exceed the 4.5% growth forecast in a Reuters poll in July.
Larry Hu, chief China economist at Macquarie, who still expects third-quarter growth to dip to 4.5%, said: “To achieve the annual growth target, policymakers may roll out more mini-stimulus measures in Q4, especially for housing.”
“In the long term, Beijing will use domestic stimulus to cushion external shocks, in order to maintain relatively steady growth.”
GDP growth is projected to slow to 4.3% in the fourth quarter, bringing full-year expansion to 4.8% – below the official target of around 5%, according to the poll. Economic growth is expected to ease further to 4.3% in 2026.
Trade tensions with Washington have intensified after China expanded its rare earth export controls, prompting a threat from U.S. President Donald Trump to raise tariffs on Chinese goods by an additional 100% starting November 1. However, U.S. officials have signalled that both countries were prepared to lower the temperature in their tariff spat.
China’s heavy reliance on manufacturing and overseas demand has made it vulnerable to external shocks. Exporters are already feeling the impact of higher U.S. tariffs imposed earlier this year, forcing many to diversify into new markets.
Wang Pengjie, sales manager of a car floor mats exporter, said his company has lost 60%-70% of U.S. orders, but is trying to compensate by expanding into emerging markets, including Southeast Asia, Mexico, and the Middle East.
Still, Wang said these new markets “can’t make up for it,” especially as competition with other Chinese producers making similar moves is intensifying. “We also have to compete more on price,” he added, noting that the firm is focusing on high-end products to weather the “very intense” price war.
On a quarterly basis, the economy is forecast to have expanded 0.8% in the third quarter, slowing from 1.1% in April-June, the poll showed.
The government is due to release third-quarter GDP data and September retail sales, industrial production and investment data at 0200 GMT on Monday.
Chinese leaders will hold a closed-door meeting from Monday through to Thursday to discuss, among other things, the country’s 15th five-year development plan, which is expected to prioritise high-tech manufacturing in the wake of the intensifying rivalry with the U.S.
While China’s export growth rebounded in September, much of the recent data show the world’s second-largest economy has lost momentum, dragged down by a prolonged property slump and trade tensions.
Worryingly, deflationary pressures have persisted despite efforts to curb overcapacity and cut-throat competition among firms, supporting the case for more policy measures to lift confidence.
MORE STIMULUS EXPECTED
The People’s Bank of China (PBOC), which has kept its policy rate steady for four consecutive months, is likely to dole out more modest easing steps in the coming weeks, anlaysts say.
“The recent escalation of tensions between China and the U.S. ahead of potential talks between Presidents Xi and Trump at the end of the month could keep the PBOC on hold for the rest of October,” Lynn Song, chief greater China economist at ING, said in a note.
“That would leave ammunition to support markets if talks do not go well. November, consequently, remains an interesting window to watch for potential easing.”
In August, Beijing announced interest subsidies on loans to households and businesses to boost consumption.
China also plans to deploy 500 billion yuan of policy-based financial tools to speed investment projects to shore up its slowing economy.
Analysts in the same Reuters poll forecast the PBOC to cut its key policy rate – the seven-day reverse repo rate – by 10 basis points in the fourth quarter, along with a similar cut to the benchmark loan prime rate (LPR).
The central bank is also expected to lower the weighted average reserve requirement ratio (RRR) by 20 basis points during the same period.
China’s consumer price inflation will stay flat this year, well below the government’s target of around 2%, before picking up 0.9% in 2026, according to the poll.
(Other stories from the October Reuters global economic poll)
(Polling by Vijayalaksmi Srinivasan and Devayani Sathyan in BENGALURU and Jing Wang in SHANGHAI; Reporting by Kevin Yao, additional reporting by Ellen Zhang;Editing by Shri Navaratnam)
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