China’s economic recovery continues to face significant challenges, as November retail sales fell short of expectations, and the real estate sector’s slump deepened, casting a shadow over Beijing’s efforts to stimulate the economy.
Key Highlights:
- Retail Sales Growth Slows: Retail sales in November rose by only 3% year-over-year, missing the 4.6% growth forecast in a Reuters poll. This marks a significant slowdown from October’s 4.8% growth, which was the fastest pace since February, buoyed by the Singles’ Day shopping festival.
- Real Estate Woes: Real estate investment for the January-to-November period shrank by 10.4% year-over-year, worsening from a 10.3% decline in the prior month. The prolonged property downturn continues to weigh heavily on the economy.
- Industrial Production Beats Expectations: Industrial production rose by 5.4% year-over-year in November, slightly exceeding economists’ expectations of 5.3% growth. This marks a small acceleration from the previous month’s 5.3% increase.
Challenges in the Economy
China’s economy is grappling with weak consumer demand, a prolonged property crisis, local government debt risks, and high unemployment, particularly among youth. Despite Beijing’s numerous stimulus measures, including interest rate cuts and loosened property purchase rules, the efforts have yet to yield sustained improvement in domestic consumption.
Economist My Bui from AMP Investment Management noted, “The stimulus effect has been short-lived. While recent economic data reflects fragile but upward momentum, weak consumption sentiment due to falling home prices remains a persistent barrier.”
Other Economic Indicators
- Fixed Asset Investment: Year-to-date fixed asset investment rose by 3.3%, slightly missing expectations of 3.4% growth. This is a decline from the 3.4% increase reported for the January-to-October period.
- Unemployment: The urban unemployment rate remained steady at 5% in November. The youth unemployment rate, which excludes students, remains a concern, standing at 17.1% in October, following a record high of 18.8% in August.
- Deflationary Pressures: Consumer inflation fell to a five-month low, with retail prices rising a modest 0.2% year-over-year, while the producer price index continued its downward trend for the 26th consecutive month.
Government Response and Future Policies
At recent high-level economic policy meetings, Chinese leadership emphasized the need to bolster domestic consumption and stimulate demand. Officials pledged to implement “proactive fiscal tools” and adopt “moderately loose monetary policies” in 2025. This marks the first time Beijing has acknowledged the need for loose monetary policy since the 2008 global financial crisis.
The government also unveiled a 10 trillion yuan ($1.4 trillion) five-year fiscal program to address local government debt challenges. However, most stimulus measures announced so far have focused on the supply side, with limited direct targeting of consumer spending.
Sectors Showing Growth
Despite the overall consumption slump, November saw strong growth in certain sectors, thanks to trade-in programs for used goods:
- Home appliances and audio-visual equipment sales grew by 22.2%.
- Furniture sales increased by 10.5%.
- Car sales rose by 6.6%.
Outlook for 2025
While Beijing’s recent policy announcements signal urgency to revive the economy, the specifics of these measures will likely be unveiled during the annual legislative sessions in March. Analysts remain cautious, noting that many of the structural issues—such as the property downturn and weak consumer confidence—require long-term solutions.
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