China's GDP expanded 5.2% YoY in the first three quarters of 2025 (Q3: +4.8%), supported by resilient consumption and steady exports that offset persistent investment weakness. Energy and chemical demand is increasingly driven by advanced manufacturing and green transition needs, while upstream price recovery has raised concerns about profit divergence along the value chain.
Consumption Drives Growth as Investment Weakens
- Consumption was the main growth engine, contributing 53.5% to GDP in the first three quarters (Q3: 56.6%) and adding 2.8 percentage points to overall growth. Service consumption grew 5.2%, with double-digit gains in sports, culture and recreation, as well as communications and information services, while goods consumption slowed. Retail sales of consumer goods rose just 3% YoY in September, the weakest pace this year.
- Net exports contributed 29% to GDP growth, up 5.2 percentage points from a year earlier, adding 1.5 percentage points to overall expansion. Despite ongoing tariff pressures, exports remained resilient.
- Investment momentum weakened notably, with gross capital formation's contribution dropping to 17.5%, down 8.8 percentage points from year-ago level. Fixed-asset investment during January and September contracted for the first time in 55 months, underscoring its diminishing role in supporting growth.
"Anti-Involution" Push Lifts Upstream Prices, Squeeze Downstream Margins
In September, the decline in Producer Price Index (PPI) narrowed for a second straight month, largely reflecting a rebound in upstream sectors. Prices for coal mining and washing (+2.5%) and ferrous metal mining (+2.6%) rose month-on-month, while declines in petroleum processing and chemical manufacturing moderated - possibly due to faster policy responses by state-owned enterprises.
However, weak end-user demand kept midstream and downstream prices subdued. If upstream costs continue rising without effective price transmission, downstream margins could come under pressure. The sustainability of the recent price rebound also bears watching. According to Mysteel data, the commodity price index has climbed sharply since July, especially in energy-related products, from around 960–970 in early July to above 1,100 by mid-October. Yet price gains in steel and construction materials remain constrained by sluggish property and infrastructure demand.
Advanced Manufacturing and Green Transition Become New Growth Engines for Energy and Chemicals
China's ethylene output rose 7% YoY in January–September, while the chemical industry's value-added increased 8.1% (September: +9%), driven by rising demand for high-end materials and electronic chemicals amid industrial upgrading. Equipment manufacturing (+9.7%) and high-tech manufacturing (+9.6%) led the gains.
Electricity consumption exceeded 1 trillion kWh for two consecutive months (July–August), with secondary industry - accounting for over half of total power use - showing a structural shift from traditional heavy industries toward high-tech and equipment manufacturing. Power use in these sectors rose 5.3% YoY in January–August, 2.5 percentage points higher than the manufacturing average. Meanwhile, gasoline and diesel consumption fell 4.5% and 8.6%, respectively, in the first three quarters (Q3: -4.4% and -8.1%), reflecting substitution by electric vehicles and LNG.
Q4 Outlook: Focus Shifts to 15th FYP as 5% Growth Target Within Reach
- China is on track to achieve its 5% full-year growth target. With GDP up 5.2% in the first three quarters, Q4 growth of just 4.4%–4.5% would suffice. International institutions have mostly maintained or raised their forecasts to a range of 4.5%–4.9%.
- No major new stimulus is expected in Q4 as policymakers turn their focus toward the 15th Five-Year Plan. Since late September, the National Development and Reform Commission (NDRC) and the Ministry of Finance have announced stimulus measures totaling around RMB 1 trillion, aimed primarily at stabilizing growth (easing local government debt pressures and supporting Q4 investment), rather than providing strong stimulus.
The full report dives deeper into:
- Macroeconomic Overview: Trends in production, consumption, investment, and exports.
- Industry-Macro Linkages: Insights into high-frequency industrial data and their macroeconomic implications.
- Energy Demand Shifts: Analysis of changing energy consumption patterns underpinning economic growth.
The above content is the major conclusions and highlights extracted from China (Energy Transition) Policy Perspective produced by GL Consulting. Click the hyperlinks for the full text or email glconsulting@mysteel.com.
