China’s economic growth has significantly slowed, registering only 4.8% in the third quarter, its lowest point in a year. This deceleration is largely a consequence of persistent trade friction with the United States and weak internal consumer spending. The situation is compounded by U.S. President Donald Trump’s recent threat to impose sweeping tariffs, possibly as high as 100%, from November. These external pressures highlight vulnerabilities in China’s export-reliant economy and cast doubt on its preparedness for the deep structural reforms needed for sustained prosperity.
Meanwhile, India is charting a different course, demonstrating remarkable economic vitality. The country reported a robust 7.8% GDP growth in the first quarter of FY 2025-26 (April-June 2025). This strong performance has positioned India as a critical driver of global economic growth, attracting international attention as a reliable alternative to China for investment and manufacturing.
The latest quarterly data reveals that China’s economic expansion has cooled to 4.8%, down from 5.2% in the previous quarter. Analysts suggest that while further stimulus measures might help push the annual growth rate close to 5%, underlying weaknesses remain. Persistent low consumer confidence, sluggish investment, and a distressed property sector continue to hamper economic recovery. Beijing’s increased reliance on manufacturing and exports to maintain growth is a short-term fix that may exacerbate structural imbalances.
Shifts in China’s trade patterns are evident, with exports to the U.S. declining by 27% compared to the previous year. However, China has successfully boosted shipments to other regions, including the EU (up 14%), Southeast Asia (up 15.6%), and Africa (up 56.4%). Despite these export gains, domestic consumption remains a significant concern, evidenced by retail sales hitting a 10-month low in September.
The escalating U.S.-China trade war has exposed critical weaknesses in China’s economic model, underscoring the need to rebalance towards domestic demand. Although exports showed some recovery in September, broader economic indicators signal a slowdown. Efforts to control overcapacity and maintain global competitiveness are being challenged by persistent inflation, while increased exports to non-U.S. markets are compressing profit margins due to intense price competition.
The potential for 100% U.S. tariffs looms large, creating significant uncertainty for Chinese businesses. While negotiations are reportedly underway, the threat itself impacts business confidence and investment decisions. For example, a Chinese aluminum manufacturer has seen U.S. orders drop dramatically, forcing them to seek business in emerging markets and adapt their strategies, though the losses are substantial.
As China navigates these economic headwinds, India’s rapid growth presents a compelling opportunity for global businesses. Fueled by strong domestic demand, supportive government policies like production-linked incentives, and ongoing reforms, India is increasingly seen as a stable and attractive destination for foreign investment and supply chain diversification. The challenges faced by China’s property sector and its subdued consumer market are driving this global shift, potentially leading to a significant realignment of economic power in Asia towards India.