China’s economic landscape faced significant challenges in November, as recent data from the National Bureau of Statistics revealed that retail sales growth and industrial production both fell short of analysts’ expectations. The figures underscore ongoing concerns regarding consumer spending and broader economic health.
Retail sales increased by just 1.3% year-on-year in November, lagging behind a forecasted growth of 2.8% and down from a 2.9% increase in the previous month. Similarly, industrial production rose by 4.8%, a slight decrease from 4.9% in October, and well below the anticipated 5% growth.
The investment sector reflected an even grimmer picture, with fixed asset investment, which includes crucial property investments, contracting by 2.6% over the year to date. This decline was steeper than the expected drop of 2.3% and marked the most significant downturn since the onset of the COVID-19 pandemic in 2020. Analysts noted that this downward trend in investment aligns with a prolonged slump in the real estate market, which has continued to weigh heavily on consumer sentiment. Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, indicated that the fall in fixed asset investment and recent declines in property values have negatively impacted consumer sentiment and anticipates that fiscal and monetary stimulus measures will be necessary in early next year.
Specifically, investment in real estate plunged 15.9% in the first eleven months of the year, exacerbating a 10.3% decline reported earlier. Continuing this downward trend, new home prices in tier-1 cities saw a decrease of 1.2%, while resale prices dropped by 5.8% year-over-year, suggesting that the property market slump is far from reaching its nadir.
Economists highlighted falling auto sales as another significant factor dragging down overall retail performance. The China Automobile Dealers Association reported a notable 8.1% decrease in auto retail sales in November, marking the first decline in three years, as many local governments suspended trade-in subsidies. Compounding the issue, the extended promotional period for Singles’ Day—a traditionally significant shopping event—did not yield the expected results, with gross merchandise volume growth halving from the prior year’s 20% to only 12%.
In response to the economic challenges, Chinese policymakers are set to implement further measures to stimulate domestic demand and bolster consumption. The Finance Ministry announced plans to issue ultra-long-term special government bonds next year, aimed at funding projects that would enhance national security and support consumer goods trade-in programs. Additionally, the budget for investment is being increased to address the downturn in fixed-asset investment.
Despite these economic hurdles, China seems poised to meet its official growth target of “around 5%” for the year, driven primarily by a remarkable increase in exports to non-U.S. markets. However, this shift has raised alarms about the sustainability of growth reliant on foreign demand. The nation recorded a trade surplus of $1.1 trillion in November, surpassing the previous full-year record, prompting scrutiny over its trade balance.
Global economic leaders have urged China to shift its focus toward domestic consumption. Kristalina Georgieva, Managing Director of the International Monetary Fund, stressed the importance of accelerating support for internal demand. Concurrently, Eswar Prasad, a noted economist, raised concerns regarding economic sustainability and called for structural reforms to promote a more balanced economic approach, emphasizing the need for enhanced labor market conditions and support for private enterprises.
As economic challenges persist, the urban unemployment rate in November remained steady at 5.1%, reflecting ongoing pressures within the labor market.
