China Faces Economic Stagnation Amid Property Crisis and Global Trade Tensions

In November 2025, China's economy exhibited significant signs of stagnation, with industrial output increasing by only 4.8% year-on-year—the weakest pace since August 2024—and retail sales rising just 1.3%, the lowest since December 2022. This slowdown is attributed to the diminishing effects of government trade-in subsidies, a persistent property crisis, and sluggish household and industrial investment, raising concerns about potential deflation. Despite relying on strong exports to sustain growth, this strategy is becoming increasingly untenable as global trade tensions escalate, with countries like France and Mexico considering tariffs on Chinese goods.

The property sector, a cornerstone of China's economy, continues to struggle. New home prices declined by 0.4% month-on-month and 2.4% year-on-year in November, indicating persistent weakness despite government efforts to stabilize the market. Property investment fell by 15.9% year-on-year in the January-November period, deepening from a 14.7% decline in the January-October period. Major developer China Vanke is attempting to delay repayment of a 2 billion yuan ($283.56 million) onshore bond due this week, after an initial proposal was rejected by bondholders.

The automotive sector also reflects the broader economic malaise, with car sales declining by 8.5% in November, marking the steepest drop in ten months. This downturn underscores weakened consumer confidence and reduced spending, even during major shopping events.

The International Monetary Fund (IMF) has urged China to accelerate structural reforms, particularly in the property sector, where approximately 70% of household wealth is concentrated. The Fund estimates that resolving the property crisis may require an investment equivalent to 5% of China's GDP over three years. IMF Managing Director Kristalina Georgieva emphasized that China, given its size and a population of 1.4 billion, can no longer rely on exports for sustainable growth. She warned that continued dependence on export-led growth may heighten global trade tensions, especially as China's exports to the U.S. have declined due to increased tariffs, while overall global exports continue to rise.

As China prepares for a new five-year plan, policymakers aim to maintain a 5% growth target. However, there are growing doubts about the sustainability of its production-driven economic model. The IMF recommends a shift towards a consumption-led growth model, reducing reliance on exports and investment. The World Bank projects China's growth to moderate to 4.5% in 2025 and 4.0% in 2026, as global trade restrictions and uncertainty weigh on exports, manufacturing investment, and hiring.

The economic slowdown has broader societal implications, including potential job losses and increased unemployment, particularly in key sectors like real estate and automotive. Persistent economic challenges can erode consumer confidence, leading to reduced spending and further economic contraction. Declining property values impact household wealth, affecting financial security and consumption patterns.

While China has faced economic slowdowns in the past, the current situation is marked by a combination of internal structural issues and external trade pressures. The depth and breadth of the current challenges, particularly in the property sector, are unprecedented in recent history.

China's economic slowdown in November 2025 underscores the pressing need for structural reforms and policy adjustments to address both domestic and international challenges. The path forward will require balancing short-term stimulus measures with long-term strategies aimed at sustainable growth and economic stability.