Spotlight on China

October 20, 2025

(169) In contrast to 38 years ago when the DOW plunged 22.6% on October 19, 1987, week four of this October kicked off on a hopeful note following upbeat U.S. official comments about prospects for averting worst-case trade scenarios after October 31 when the current trade truce with China runs out. Negotiations will proceed this week in Malaysia, leading hopefully to a Trump-Xi discussion later in the month. President Trump has singled out soybeans, fentanyl and access to rare earth minerals as key issues to be worked out.

Today also coincided with the release of several Chinese economic indicators and the monthly fixing of China’s 1-year and 5-year Loan Prime Rates. As in September, August, July and June, these interest rates of the People’s Bank of China, which influence the cost of mortgage, corporate and consumer loans, were left unchanged. Their last modification in May was a 10-basis point reduction to 3.0% and 3.5%, respectively. Despite keeping the status quo for a fifth straight time, the central bank suggested that a further decline may not be far away.

Chinese real GDP growth last quarter of 1.1% from 2Q 2025 and 4.8% year-0n-year (least in a year) outperformed analyst forecasts. Average growth over the first three quarters of 5.1% has been marginally better than the full-2024 pace of 5.0% and reflects support from monetary policy and fiscal measures to promote consumption. A 6.5% on-year increase in Chinese industrial production in September also beat expectations and was the largest gain since 6.8% recorded in June. Output in January-September was 6.2% above a year earlier and better than the full-2024 increase of 5.8%. Alternatively, retail sales fell 0.2% on month in September and posted the smallest 12-month increase (3.0%) in 13 months. The 3.0% rise compares unfavorably to a 4.6% average increase in the first eight months of this year. Fixed asset investment likewise underperformed expectations, recording the first year-to-date decline (-0.5%) since July 2020. China’s jobless rate settled back 0.1 percentage point last month to match July’s 5.2%, and property prices recorded their smallest year-on-year decline (-2.2% in September) in 18 months.

In overnight financial market activity,

The dollar sowed only marginal net movements against other major currencies compared to Friday closing levels.
Ten-year sovereign debt yields held steady in the United States and Italy, slid a basis point in the U.K. and Germany and ticked up a basis point in Spain. Larger moves involved a 4-basis point increase in Japan and a 2-bp uptick in France. Bank of Japan Board member Takata expressed a preference to raise the central bank interest rate quite soon, and expectations have strengthened that LDP leader Takaichi will be selected prime minister in tomorrow’s scheduled vote by other Diet parliamentarians. The increased French 10-year sovereign debt yield followed a French credit rating downgrade b S&P to A+ from AA-.
Equity markets closed up this Monday by 3.4% in Japan, 2.4% in Hong Kong, 1.4% in Taiwan and 2.2% in Indonesia. German, Italian, and Spain’s stock markets so far have risen a bit more than 1.0%, while key U.S. futures increases range from 0.3% in the Dow to 1.1% in the Russell 2000 about 30 minutes prior to the opening bell.
The prices of Bitcoin and gold have jumped 2.2% and 1.6%, while oil is 0.8% softer.

Aside from the aforementioned slew of Chinese data releases, the data menu today is pretty thin.

Consumer prices in New Zealand jumped 1.0% in 3Q, their largest quarterly advance in a year and resulting in a year-on-year increase of 3.0% that is resting at the top of the Reserve Bank of New Zealand’s target range.

German producer prices in September dipped 0.1% on month and fell 1.7% below their year-earlier level. PPI deflation continues to be paced by energy (-7.3% year-on-year), while other items in the index collectively are 0.9% above year-earlier levels.

Estonian producer price inflation of 0.5% in September interrupted a trio of negative readings in June, July and August.

A 1.2% on-year drop in Polish producer prices was its least negative in a half year. In contrast, PPI inflation in the country of Georgia accelerated to 4.4% in September from 3.8% in August and 3.0% in June.

The British Rightmove house price year-on-year increase was a mere 0.1% in October.

Euroland’s seasonally adjusted EUR 11.9 billion current account surplus in August after EUR 29.8 billion in July was its smallest in 28 months. The unadjusted surplus over the last dozen reported months equaled 2.0% of GDP, down from 2.7% in the previous statement year.

Construction output in the euro area dipped 0.1% in August and was unchanged in July-August on average from the second quarter’s mean level. August construction exceeded its year earlier level by a mere 0.1%.

Tags: Chinese GDP, Chinese retail sales and industrial production, Euroland current account

This entry was posted
on Monday, October 20th, 2025 at 6:49 am and is filed under New Overnight Developments Abroad – Daily Update.
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