CX Weekly Briefing: China’s Economy Shows Signs of Cooling

Over the past week, China faced a range of headline-making developments across finance, business, technology, and international relations.

In the economic sphere, three of China’s major economic indicators showed signs of slowing in April. Fixed-asset investment growth decelerated to 4% year-on-year during the first four months of 2025, primarily due to reduced momentum in manufacturing investment and a substantial decline in real estate development investment. Retail sales growth also lost pace, increasing by 5.1% year-on-year in April, a figure that fell below expectations as car sales remained weak. On the other hand, industrial production grew by 6.1% year-on-year, exceeding projections, with strong segments such as new-energy vehicles and solar cells witnessing over 30% growth. However, the value of industrial exports fell notably, a downturn likely tied to recent U.S. tariff hikes [para. 3].

Amid this backdrop, Chinese banks initiated a new wave of interest rate cuts. The one-year and five-year-plus loan prime rates were reduced to 3% and 3.5% respectively—both dropping by 0.1 percentage points. Additionally, the nation’s six major banks simultaneously decreased one-year fixed deposit rates by 0.15 percentage points, bringing them below 1% for the first time this year. These measures followed a decrease in the People’s Bank of China’s key seven-day reverse repo rate on May 8 [para. 4].

In the property sector, the continuous rise in first-tier city home prices paused in April. New government data revealed that the prices of new commercial residences remained flat in leading cities—Beijing, Shanghai, Guangzhou, and Shenzhen—which are typically seen as barometers for the real estate market. Previously, monthly price increases had averaged 0.1% in the first three months of 2025 and 0.2% in December 2024, raising concerns about the sector’s prospects [para. 5]. Real estate development continues to face headwinds, with investment falling roughly 10% year-on-year over the past four months. According to JPMorgan Chase’s chief China economist, investment, sales, and new construction starts remain on a downward trajectory, and even with a bottoming of new starts, a rebound in investment is expected to lag [para. 6].

In business and tech, BYD—the automaker and battery producer—expanded its focus to lithium batteries for two- and three-wheeled electric vehicles, entering a market that averages around 50 million electric scooter sales annually. However, the company faces entrenched competition and potential challenges as it seeks to move beyond the cheaper, dominant lead-acid batteries [para. 7]. Tencent Holdings took a significant step into artificial intelligence by updating its enterprise large language model (LLM) knowledge base, empowering businesses to develop AI-powered agents. This move is part of its “AI in All” strategy and aligns Tencent with global tech leaders like Microsoft [para. 8].

Electric vehicle manufacturer Leapmotor posted robust sales in early 2025, selling 87,552 vehicles in the first quarter—more than its entire sales in the previous year’s first half. This surge helped shrink its net loss by over 80% year-on-year, with quarterly revenue surpassing 10 billion yuan. While China’s domestic auto brands dominate the home market, most remain unprofitable; only Li Auto reported an annual profit as of March 2024 [para. 9].

Internationally, China condemned new U.S. efforts to ban its advanced chips globally, labeling these as protectionist and warning of possible legal consequences against those who comply with the U.S. measures. Meanwhile, China pledged $500 million over five years to the WHO after the U.S. withdrawal, making China the top donor and helping address a $600 million funding gap that threatens the organization’s ability to manage global health emergencies [para. 10][para. 11].

[para. 3]