China’s GDP growth for the third quarter of 2025 was 4.8% compared to last year, meeting what the market expected. However, there are concerns about a slowdown because industrial production and exports are starting to fall. Final consumption added 2.7 points to growth, while net exports added 1.2 points. Gross capital formation fell to 0.9 points from 1.3 points in the last quarter, indicating cautious investing.

China’s Expected GDP Growth

China’s GDP is projected to grow by 5.0% in 2025, needing a growth rate of 4.5% in the fourth quarter. The impact of US tariffs is expected to influence growth in 2026, with predictions set at 4.2%. In October, the 1-year and 5-year Loan Prime Rates stayed the same. The People’s Bank of China (PBOC) aims to keep an accommodating monetary policy, ensuring there is enough liquidity to support government bonds and markets. With the US Federal Reserve likely to cut rates and domestic deflation pressures, the PBOC may lower interest rates by 10 basis points later this year. A 50-basis-point reduction in banks’ reserve requirement ratio might also be on the table. Talks about the 15th five-year plan will happen at the Fourth Plenum, with announcements expected at the National People’s Congress in March 2026. As of today, October 21st, 2025, mixed economic signals from China suggest opportunities for strategic derivatives. The headline GDP number hides underlying weaknesses, especially since September’s industrial production growth slowed to 4.1%, the lowest since early 2024. This slowdown, combined with exports declining by 1.5% last month, suggests that options betting against industrial-related assets may be wise.

Monetary Policy and Currency Considerations

The People’s Bank of China is likely to keep an accommodating policy, indicating potential currency weakness. With expected rate cuts later this year, the yuan may face more downward pressure, and the USD/CNH pair could test the 7.40 level soon. Traders might consider buying call options on USD/CNH or setting forward positions to benefit from this expected decline. This week is critical due to the Fourth Plenum, concluding on Thursday, which could lead to short-term uncertainty. Implied volatility on Hang Seng Tech Index options has risen to a three-month high of 35% ahead of the event. This situation is ideal for volatility strategies, like purchasing straddles or strangles on important Chinese equity ETFs, which could profit from significant market movements after policy announcements. The expectation of monetary easing in China is supported by international trends. The CME FedWatch tool shows a 75% chance of a 25-basis-point rate cut by the US Federal Reserve in December 2025. This global easing trend gives the PBOC more room to act without causing major capital outflows, reinforcing our bearish outlook on the yuan for the remainder of the year. Even though the overall economic picture is slowing, the expected liquidity injections from the PBOC and a focus on consumption could benefit domestic stocks. We’re starting to see signs of divergence, where the domestic A-share market may outperform amidst a weakening currency. Thus, traders might consider long positions in China A50 index futures while simultaneously having short exposure in CNH. Create your live VT Markets account and start trading now.

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