China is aiming to grow "close to 5%" this year after disappointing July data.

As we've become accustomed to, China's National Bureau of Statistics has just released a series of macroeconomic data for the month of July this Friday, providing a snapshot of how the Asian giant's economy is performing. All of these figures fell short of market expectations, demonstrating that in the seventh month of the year, there was a slowdown in activity that many experts attribute to high temperatures and rain. All of this leads them to believe that the country needs a new stimulus to achieve its desired growth of "around 5%," which they set at the beginning of the year.

Industry, one of the fundamental pillars of the country's economy, showed slower activity than expected during the month of July. Specifically, the value added of the Asian giant's secondary sector slowed to 5.7% year-on-year in the seventh month of the year, from its peak of 6.8% recorded in June. A much steeper decline than expected by the market consensus.

Overall, most industrial sector categories moderated in the second month of summer. Manufacturing growth remained somewhat stronger, advancing 6.2% year-over-year, and high-tech manufacturing also significantly exceeded expectations, recording 9.3% growth.

By sector, the worst performer was non-metallic minerals, which contracted by 0.6%. This was followed by food (3.8%) and beverages (0.1%), along with export-dependent textiles (1.7%).

In contrast, the automotive, rail, shipbuilding, and aerospace sectors were stronger, significantly exceeding forecasts, with growth of 8.5% and 13.7% respectively. The same was true for the manufacturing of machinery and electrical equipment, which grew by 10.2%.

By product category, sustained growth was seen in the semiconductor sector , up 15.0%, and in the new energy vehicle sector, up 17.1%. The rapidly expanding robotics industry stands out for its results: industrial robot production grew 24.0%, and service robot production increased 12.8%.

ING Economics' China economist, Song Lynn, commented that resilient external demand was "an important factor" for industrial production in China this year. " With the US-China trade truce extended for another 90 days, and other competitors generally facing higher tariffs from the US starting in August, the outlook suggests that demand could remain relatively stable for much of the remainder of 2025," he said.

One of the main problems facing the Chinese economy, in addition to the real estate crisis , is the problem of domestic demand and consumption. The July inflation data already provided a snapshot of a less-than-favorable trend.

In July 2025, inflation in China remained virtually unchanged year-on-year, growing at 0.0% year-on-year . By comparison, it had been 0.1% in June. However, on a monthly basis, there was a notable rebound: the CPI rose 0.4% in July compared to June, reversing a 0.1% decline recorded the previous month.

This slowdown in domestic demand is confirmed by recent retail sales data, which in July did not perform as expected. In July, a very modest expansion of 3.7% year-on-year was recorded, the lowest increase so far this year after the 4.8% increase the previous month. Market consensus predicted a slowdown in sales, yes, but not as pronounced, predicting a slowdown of around 4.6%.

Bloomberg economists Chang Shu and Eric Zhu believe that Chinese consumption "lacks self-sustaining momentum," which is why it's behaving this way. They reiterated in a commentary this Friday that the small increase is due "to buyback programs for old appliances."

The experts remain cautious and reiterate that it remains to be seen how quickly new policies, such as the child subsidy and the preschool fee waiver, are implemented this year. "This will help restore sentiment and boost consumption," the experts point out.

Last week, the government announced several plans to implement consumer loan subsidies for a period of one year, starting in September. Consumers applying for loans of up to 50,000 yuan will be eligible for a 1% government interest rate subsidy. The central government will therefore cover 90% of the interest costs, and local governments will cover the remaining 10%.

"The surge in new yuan-denominated loans at the start of the second half—the first in two decades—indicates a lack of confidence in the private sector, especially among households, which has led to a reduction in spending. This bodes ill for the future of economic activity," Bloomberg experts say.

Thus, Lynn (ING) believes that this new consumer incentive policy "will help marginally," especially for those categories that may rely more on consumer loans, such as the purchase of cars or household appliances . The economist believes that the interest rate cut "will always be good news for households," but he believes it is "unlikely" that the ultimate impact will be decisive.

"The real problem facing Chinese household consumption isn't excessively expensive consumer loans, but rather a reluctance to spend in a context of low confidence," the expert emphasized.

Meanwhile, fixed-asset investment growth also remained disappointing in the first seven months of the year, slowing by 1.6% as a result of a contraction in real estate. This caused the urban unemployment rate to rise more than expected, to 5.2%.

That China is enduring a massive real estate crisis is nothing new, but far from being resolved, it appears to be getting worse. This Friday, the National Bureau of Statistics (NBS) also released the price index for the 70 largest cities, with an equally disappointing result.

Prices continued to decline from their peak. Specifically, new home prices fell 10.7% and existing home prices fell 18.8% year-over-year. Monthly, new home construction prices slowed by 0.31%, slightly higher than the 0.27% drop recorded at the beginning of the summer. This marks four consecutive months of declines in new home prices.

Existing homes didn't fare much better either. Prices fell 0.55% month-on-month, a slightly smaller drop compared to the 0.61% month-on-month drop in June. "None of these figures are likely to inspire much optimism," reiterated the ING economist.

"The rapid decline in real estate prices in recent months indicates the need for greater policy support," explains Song Lynn.

Chinese authorities have been attempting to stem this real estate crisis with measures that they hope will halt the uncontrolled fall in prices. This issue is of particular concern to the government, as housing has significant social implications , as it is one of the main drivers of household investment.

In this regard, Lynn states that due to this high exposure of Chinese households to the real estate sector, it is necessary to "establish a floor on prices." The expert considers this measure "crucial" to "restore confidence and generate a sustained recovery in consumption."

"This is especially important as domestic demand is expected to become an increasingly important economic driver. It's hard to expect consumers to spend more confidently if their largest asset continues to depreciate every month."

For the expert, the good news is that soon "we could see greater support." The government continues to expand its efforts to acquire unsold properties. Initially, this initiative posed some challenges "given local governments' financial constraints and reluctance to make purchases," says Lynn. This is especially true in provinces with an oversupply.

This real estate crisis in China has been plaguing the world's second-largest economy for more than four years . Sales continued to fall in the second quarter, and policy support measures remain necessary at a time when the government is providing significant stimulus to sustain the economy.

The positive effect seen in late summer 2024 has completely faded, and Beijing is poised to launch more purchases. "The real estate market's performance will weaken in the second half of the year," Fitch Ratings analysts, led by Tyran Kam, said in a note last week: "The sector's recovery remains crucial and depends on economic conditions, the performance of the labor market, and the outlook for household income."

In the four Tier 1 cities, including Beijing, home values fell by at least 0.9% monthly. Analysts therefore expect a slight recovery in the real estate sector in these cities. In Tier 2 and Tier 3 cities, the declines also moderated, thanks to local governments' measures to ease purchasing restrictions.

Last week, the Beijing government announced it was opening up the option for select residents to purchase an unlimited number of homes outside the city center. Shanghai and Shenzhen could also follow the capital's example, according to Bloomberg Intelligence analysts.

HSBC analysts wrote in a note on Monday that this change is "positive" as it "shows greater proactivity on the part of the government in implementing measures." However, the easing is not significant, as those looking to purchase multiple homes will prefer to buy in central areas, they explained.

July's data shows the beginning of difficult months for the Chinese economy. Song Lynn believes the second half of this year will be "more complex" after exceeding most growth forecasts during the first half of the year.

"Such a rapid loss of momentum still points to deeper risks, such as weakening confidence. We expect the government to increase stimulus. Indeed, recent soft credit data could prompt the People's Bank of China to implement further monetary easing as early as September," explained Chang Shu and Eric Zhu.

In this regard, the ING expert believes that these support measures may be announced "in the coming months" following this economic slowdown. Therefore, it is possible that the country will achieve its 5% growth target.