The economic slowdown in China worsened in November as consumption, industrial output growth, and investment headed into a downturn, with the Chinese government striving to restrain supply and address weak demand and a declining property market.
Retail sales increased 1.3 percent over the last 12 months compared to the previous month, representing a notable improvement over Reuters’ median expectation of 2.8 percent growth. This growth is also higher than the 2.9 percent growth recorded in the previous month.
Industrial production has increased by 4.8 percent in November, compared to a year earlier, falling short of the expected increase of 5 percent and the lowest growth since August 2024.
Fixed asset investments, including property, fell by 2.6 percent in the period between January and November compared with a decline of 2.3 percent a year ago, even more severe than what economists had predicted.
According to data from Wind Information going back to 1992, it fell to 1.7 percent in the January to October growth, and the greatest drop since the pandemic outbreak of 2020.
President and Chief Economist at Pinpoint Asset Management, Zhiwei Zhang, stated in a note after the data, projecting more supportive fiscal and monetary stimulus measures in the first quarter next year.
He said that “The contraction of fixed asset investment and the drop in property prices in recent months have been transmitted to the consumer sentiment.”
The real estate investment plunge fell 15.9 percent during the initial 11 months of this year, compared to the 10.3 percent decline by the same period during January through October, as the property sink continues.
Therefore, in another indication that the sector recession continues its search for a bottom, the downward movements of home prices in 70 major cities intensified in November.
New home prices decreased 1.2 percent in tier-1 cities such as Beijing, Guangzhou, and Shenzhen, whereas resale home prices declined 5.8 percent compared to the previous year.
However, Goldman Sachs economists in a preview last week identified the declining auto sales as a big deceleration to the total retail sales and the “negative distortion” effect of the earlier-than-usual commencement of the Singles-Day online shopping festival that shifted November demand into October.
The Chinese Automobile Dealers Association data revealed that in November, auto retail sales by volume dropped to the lowest in three years, decreasing 8.1 percent from the year before to 2.23 million cars, as many local governments suspended the trade-in subsidies.
Multiple online shopping platforms prolonged their promotion teaser in an attempt to shock consumer spending, which lasted between the first half of October and November 11, and was the longest in the history of the Singles’ Day sales period.
Syntun data reported that the sales performance was sluggish in that consumers were tightening their purse strings, and gross merchandise volume increased only 12 percent, compared to 20 percent last year.
Chinese policymakers have promised to provide more policy support to stimulate domestic demand and increase consumption and investment in the coming year.
In a statement issued on Saturday, the finance ministry announced that it was going to issue ultra-long-term special government bonds next year to finance projects that would reinforce national security.
The proceeds shall also be used for equipment upgrades and consumer goods trade-in programs. The ministry also promised to increase its budget on investment to alleviate the declining fixed-asset investment over recent months.
But analysts were not as optimistic because Beijing has not so far put anything substantial in the form of stimulus measures on the table.
Market Analyst at Asset Management Firm eToro, Zavier Wong, added that “Even though we’re seeing targeted policy support in place, it is hard to generate a meaningful pickup in consumption without clearer improvement in job prospects and wage growth.”
The sustainability of the Chinese economic growth was of concern to Eswar Prasad, the professor of economics at Cornell University and a senior fellow at the Brookings Institution.
In an opinion article released on Sunday, the economist called upon structural changes to reorganize the economy, such as actions to boost the labor market, boost the social safety net, and reinforce the private enterprises.
Prasad noted that “The government clearly wants to rebalance growth and understands what’s needed to bolster household consumption and raise productivity. Yet there is little sense of urgency and no clear timeline on concrete policy measures to accomplish these objectives.”
The urban unemployment rate in November was at 5.1 percent, which remained unchanged from the previous month. Unemployment amongst the youths has been more worrying, and the recent figure of 17.3 percent is the latest figure for October.
Meanwhile, the economy of China is seen to be heading to achieve the official growth standards of “around 5 percent,” courtesy of a rush in exports to non-U.S. markets despite the tariff tension with Washington taking a toll on the shipments to the largest consumer in the world.
The trade surplus in China increased to an all-time high of $1.1 trillion in November, more than its yearly record of $992.2 billion in 2024, in the space of 11 months, raising increased apprehensions on its dependence on foreign demand, and depreciation of its currency to keep its exports competitive.
International Monetary Fund Managing Director Kristalina Georgieva, last week, urged China to “accelerate” its support to domestic consumption and abandon dependence on exports to propel growth.
Prasad said, “China has sought to use the renminbi’s exchange rate as a tool to bolster exports,” citing the huge depreciation in the yuan’s value on a broad trade-weighted basis.
LSEG data indicated that the offshore yuan rose to 7.0475 per dollar on Monday, the highest point in the currency since October of last year.
