China’s economic engine is sputtering, with GDP growth hitting a 4.8% low in the July-September quarter, marking its slowest expansion in a year. This slowdown is attributed to escalating trade tensions with the United States and subdued domestic demand, leaving Beijing’s economy vulnerable. Adding to the concerns, U.S. President Donald Trump has threatened substantial tariffs, potentially up to 100%, starting in November. China’s significant reliance on exports now raises questions about its capacity to implement necessary structural reforms for sustainable long-term growth.
In stark contrast, India is experiencing a robust economic surge. The first quarter of FY 2025-26 (April-June 2025) saw India achieve an impressive 7.8% growth, positioning it as a pivotal engine for global economic expansion. As China grapples with its decelerating economy, the world is increasingly looking towards India as a stable and growing alternative.
The latest GDP figures from China reveal a 4.8% growth rate for the third quarter. While the economy may reach around 5% for the full year, potentially with further stimulus, underlying issues persist. Experts point to weak consumer confidence, softening investment, and ongoing property market pressures as critical challenges requiring immediate attention. China’s strategy to bolster growth has leaned heavily on manufacturing and exports, but this is accompanied by concerns about structural imbalances that could have lasting repercussions.
Recent trade data indicates a strategic shift by China away from the U.S. market. Exports to the United States, historically a major consumer base, have plummeted by 27% year-over-year. Concurrently, shipments to the European Union, Southeast Asia, and Africa have seen significant increases of 14%, 15.6%, and 56.4%, respectively. However, this pivot does not fully compensate for the slump in domestic demand, with retail sales in September reaching a 10-month low. Despite efforts to manage overcapacity and maintain competitiveness, inflation pressures continue to mount.
Profitability is taking a hit as China intensifies exports to non-U.S. markets, facing fierce price competition that erodes margins. This makes the current growth trajectory unsustainable until trade disputes are resolved. The looming threat of 100% U.S. tariffs from November adds further uncertainty, though indications suggest both nations are open to finding a resolution.
Businesses are already feeling the impact. One Chinese aluminum manufacturer reported an 80-90% drop in U.S. orders, leading to a 20% revenue decline. While exploring new markets in Latin America, Africa, and Southeast Asia requires adaptation, including learning new languages and increasing international travel, these efforts struggle to offset the substantial losses from the U.S. market.
As China’s growth falters, India’s economic acceleration offers a compelling alternative. Driven by strong domestic demand, production-linked incentives, and ongoing structural reforms, India is emerging as a key destination for global manufacturing and investment. The ongoing property crisis and weak consumer sentiment in China are prompting a diversification of global supply chains and capital, presenting an unprecedented opportunity for India to capture a greater share of global exports and investments, potentially shifting the economic balance in Asia.
