06:54 AM EDT, 09/15/2025 (MT Newswires) -- Ahead of this week's policy meetings at the central bank in the United States, United Kingdom and Japan, the main focus at the start of this week has been the release of the latest monthly economic activity data from China, which has revealed growth slowed for the second consecutive month, said MUFG.

The slowdown was most evident for fixed asset investment (FAI), where the annual rate of growth fell to just 0.5% in the first eight months of this year, wrote the bank in a note to clients. It was the slowest pace of growth since August 2020, just after the initial negative COVID shock.

The slowdown was driven by a deeper contraction in private investment (-2.3%) and a sharper slowdown in public investment (from 3.5% to 2.3%), stated MUFG. At the same time, retail sales growth slowed, although more modestly to 4.6% year-to-date (YTD) year-over-year in August.

After growing by 5.3% in 1H of this year, China's economy is clearly slowing down in Q3, pointed out the bank. It still leaves the economy on track to meet the government growth target for this year of around 5%, but if the economy continues to slow, it will encourage expectations for further policy stimulus later this year.

The National Bureau of Statistics (NBS) stated that China needs to "focus on stabilizing employment, enterprises, markets and expectations." Noting "there are still plenty of instability and uncertainties with the external environment, and the economy still faces many risks and challenges".

The impact on financial markets in China and Asia to the disappointing economic data releases has been muted, added the bank. China's equity market is continuing to trade close to the highest levels in a decade, and USD/CNY remains close to YTD lows at just above the 7.1200 level.

Over the past month, the renminbi (CNY) has strengthened by around +0.8% against the US dollar (USD) after China's central bank consistently set the daily fix for USD/CNY lower in H2 August, according to MUFG.

However, it has been held at just above the 7.1000 level during H1 September. The loss of growth momentum in China may discourage domestic policymakers from allowing the renminbi to strengthen further in the near term, noted the bank.