China’s Industrial Output Growth Weakest in 15 Months
- Phạm Gia Phú
- 31 thg 12, 2025
- 5 phút đọc
by Phạm Gia Phú, Nguyễn Đức Khánh An, and Nguyễn Anh Trâm
China industrial sector
Summary
The reported industrial output growth of China is weakest since September 2024 despite exports reaching 11-month high.
Weak domestic demand was believed to drag China’s output growth.
The industrial sector could have been tackled by a conflicting global market.
Could support measures boost China’s industrial output growth?
Overview
On the 15th of December, 2025, the People’s Republic of China - considered to be “the world’s manufacturing hub”, reported the weakest monthly year-on-year industrial output growth since September 2024 at 4.8% [1].
It was forecasted to be around 5%, with the industrial output growth from November being around 4.9%. For the first 11 months of the year, industrial production increased by 6.0% and on a monthly basis, industrial output rose by 0.44% [2].
Meanwhile, the General Administration of Customs revealed exports increased by 5.9% year-on-year to a 11-month high of US$330.35 billion, surpassing expectations of 3.8% and recovering from the 1.1% fall in the previous month. From the start of the year to the point of report, China’s exports rose 5.4% from a year earlier to US$3.41 trillion [3].
Soft domestic demand
2025 marked the fifth year of China’s property crisis, the consequence of two decades of high investments and stricter government lending rules. Real estate prices across 70 cities have fluctuated since the start of 2020, and with the collapse of real estate giants such as Evergrande and Country Garden in 2024, prices fell faster along with direct investments [4].
In November, real estate prices fell at a slower rate of 2.4% [5]. Stevenson-Yang - China political economy analyst - believes that the property sector is on the course of another “10 years of negative or flat growth” in price [6]. This meant that families would have put their savings into lost value apartments, leaving them stuck with mortgages while unabling to sell homes. Thus, household consumption is widely reduced as China is the country with the highest house ownership rate.
Low demand for housing has badly affected the steel, cement, and other construction materials sales. Additionally, the country’s goal to shift towards a green economy by introducing renewable portfolio standards has set up difficulties in their production [7]. Data by the National Bureau of Statistics shows that in the span of the property crisis, cement production has rapidly shrunk by 8k of ten thousands tonnes, while World Steel Association reported reported that steel production fluctuated but gradually shrinking [8].
China Cement Production
China Steel Production
Support measures to boost
In response to China’s weakest industrial output growth in 15 months, policymakers face the challenge of stabilizing short-term momentum while addressing deeper structural constraints.
Support measures introduced since mid-2024, particularly trade-in programmes for household durables such as washing machines and refrigerators, have played a visible role in lifting consumption during the second quarter. By lowering the effective purchase cost of big-ticket items, these programmes helped bring forward household spending and provided temporary support to downstream manufacturing sectors, including home appliances and consumer electronics.
Alongside these efforts, labour market measures such as targeted tax relief and employment subsidies have contributed to easing immediate employment pressures. By reducing hiring costs for firms and supporting household disposable income, these policies have helped prevent a sharper deterioration in labour market conditions at a time of weakening industrial momentum. These stabilized short-term consumption and prevented a sharper contraction in consumer-linked manufacturing; mitigated employment pressures during a period of slowing industrial output growth [13].
Despite these gains, the effects remain largely temporary. High youth unemployment, weak income growth expectations, and persistent stress in the real estate sector continue to weigh heavily on consumer confidence. As a result, households remain cautious, limiting the multiplier effect of consumption incentives. Without stronger income growth and improved confidence, such measures risk losing effectiveness once subsidies expire.
Government criticism of overcapacity and aggressive price competition in the industrial sector marks a notable shift in policy signalling. Rapid capacity expansion (particularly in manufacturing and technology-intensive sectors) has contributed to declining profitability and entrenched deflationary pressures. These dynamics have reduced the tax base and constrained household income growth, indirectly suppressing consumption in the post-pandemic period [14].
By acknowledging these distortions, policymakers appear to be laying the groundwork for a more substantial course correction in industry policy priorities. That signal recognition that supply-side expansion has generated diminishing returns, opens the door to rebalancing policy away from pure capacity growth toward sustainability and profitability.
But, correcting overcapacity is politically and economically sensitive. Capacity reduction risks short-term job losses and lower headline growth, particularly in regions heavily dependent on industrial production. Moreover, reversing years of capacity-driven incentives requires coordination across ministries and local governments, which have often prioritised output growth over profitability [15].
If implemented meaningfully, the recalibration of industrial policy could mark a shift away from a growth model centred on geopolitically driven global competition and toward strengthening domestic demand. China’s rapid capacity build-up has delivered scale advantages but also produced negative economic “spillovers”, including deflation and weak household income growth.
Rebalancing toward consumption would require restraining excessive supply expansion while improving the transmission of industrial growth into household incomes and domestic spending which potentially improves income growth and consumer confidence over the medium term. It can also reduce reliance on external demand and price-based competition.
Though, this transition is inherently complex. Capacity reductions may initially discourage industrial output growth, conflicting with short-term stabilisation goals. Furthermore, shifting incentives away from export-oriented manufacturing could face resistance from entrenched industrial stakeholders [16].
Citations:
[1]: “China Industrial Production”. 2025. National Bureau of Statistics of China, illustrated by Trading Economics. URL https://tradingeconomics.com/china/industrial-production
[2]: “China Industrial Production YoY”. 2025. National Bureau of Statistics of China, illustrated by Investing.com. URL https://www.investing.com/economic-calendar/chinese-industrial-production-462
[3]: “China Exports”. 2025. General Administration of Customs, illustrated by Trading Economics. URL https://tradingeconomics.com/china/exports
[4]: “Investment in Real Estate Development in the First Half of 2025”. July 6, 2025. National Bureau of Statistics of China. URL https://www.stats.gov.cn/english/PressRelease/202508/t20250805_1960597.html
Martin, Nick. “Why China's property crash must be kept top secret”. Dec 15, 2025. DW. URL https://www.dw.com/en/china-property-real-estate-housing-xi-jinping-economy/a-75074157
[5]: “China Newly Built House Prices YoY Change”. 2025. National Bureau of Statistics of China, illustrated by Trading Economics. URL https://tradingeconomics.com/china/housing-index
[6]: Martin, Nick. “Why China's property crash must be kept top secret”. Dec 15, 2025. DW. URL https://www.dw.com/en/china-property-real-estate-housing-xi-jinping-economy/a-75074157
[7]: Howe, Colleen. “China sets its first renewable standards for steel, cement and polysilicon”. Jul 12, 2025. Reuters. URL https://www.reuters.com/sustainability/boards-policy-regulation/china-sets-its-first-renewable-standards-steel-cement-polysilicon-2025-07-11/
[8]: “China Cement Production”. 2025. National Bureau of Statistics of China, illustrated by Trading Economics. URL https://tradingeconomics.com/china/cement-production
“China Steel Production”. 2025. World Steel Association, illustrated by Trading Economics. URL https://tradingeconomics.com/china/steel-production
[9], [10], [11]: “Tracking the Trump Tariffs”. Dec 17, 2025. Tax Policy Center. URL https://taxpolicycenter.org/features/tracking-trump-tariffs
[12]: Bao, Anniek. “China’s factory activity unexpectedly contracts in November, missing estimates, private survey shows”. Dec 1, 2025. CNBC. URL https://www.cnbc.com/2025/12/01/china-ratingdog-factory-activity-contracts-in-november-private-survey-rating-dog-sp-pmi.html
[13]: Brown, Alexander. “Solid GDP growth in Q2 masks China’s challenges”. Jul 23, 2025. MERICS Economic Indicators. URL https://merics.org/en/tracker/solid-gdp-growth-q2-masks-chinas-challenges
[14]: Lemair, Claire. “China Wants to Address Overcapacity in Critical Sectors”. Aug 21, 2025. Brussels Signal.
[15]: Xueqing, Jiang. “Consumption-led Growth Eyed to Drive Expansion”. Dec 26, 2025. China Daily. URL https://www.chinadaily.com.cn/a/202512/26/WS694dec09a310d6866eb3096a.html
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