China’s economy continued to grow in the third quarter of 2025, with GDP rising by 5.2% compared to the previous year. The World Bank’s latest China Economic Update reports that this growth was supported by fiscal and monetary policies aimed at boosting domestic consumption and investment. Export demand from developing countries also contributed to economic momentum.
Despite these gains, consumer spending remained subdued as households faced a weak labor market and falling home prices. Investment growth slowed in the third quarter due to ongoing adjustments in the property sector and reduced manufacturing and infrastructure investment, which were affected by profit pressures and tighter local government budgets.
The World Bank estimates that China’s economic growth will reach 4.9% for 2025 and projects it will slow to 4.4% in 2026 as current challenges are expected to continue. The report notes that recent fiscal measures and some stability in global trade policy should help support both investment and exports.
“China’s growth in the coming years will depend more on domestic demand,” said Mara Warwick, World Bank Division Director for China, Mongolia, and Korea. “In addition to short-term fiscal stimulus, advancing structural reforms of the social protection system and creating a more predictable environment for businesses can help boost confidence and lay the groundwork for resilient, sustainable growth.”
The outlook remains uncertain due to persistent risks such as difficulties in the property sector, limited earning prospects, a soft labor market, and unpredictable trade policies. These factors could negatively impact consumption and investment if they persist longer than anticipated. However, stronger-than-expected fiscal spending or decisive actions to stabilize the property sector could result in higher growth than currently projected.
The update also highlights how high household savings influence consumption patterns in China. Nearly half of household savings are invested in housing while about a quarter are held as bank deposits. Households tend toward low-risk deposits because of precautionary motives, few long-term financial products, declining home values, and uncertain income expectations. While large household deposits provide inexpensive financing for banks, they may distort price signals and lead to inefficient capital allocation.
“China’s financial system, especially non-bank institutions such as private pension funds, life insurance companies, and mutual funds, could play a stronger role in supporting household consumption,” said Elitza Mileva, World Bank Lead Economist for China. “Enhancing the depth and transparency of capital markets, as well as allowing market forces to guide financial decisions more effectively, can improve returns, reduce precautionary saving, and drive rebalancing towards consumption.”