China’s Retail Sales Growth Slows Amid Fading Stimulus Effects

China’s retail sales growth unexpectedly weakened in November, rising by just 3% compared to the same month last year. This is the slowest growth in 3 months and far below the 4.8% increase seen in October. 

Industrial Output Shows Modest Growth

Industrial output increased by 5.4%, slightly better than the 5.3% growth in the previous month.

Despite efforts to stimulate the economy, retail sales have lagged behind industrial production since the pandemic. China’s push to boost manufacturing has faced criticism from the US and the European Union, accusing China of flooding foreign markets with low-cost goods. The risk of a trade war with the US after Donald Trump’s potential re-election could further hurt exports, which have played a key role in economic growth this year.

Government Focus on Stimulating Spending

Chinese officials are prioritising the need to boost consumer spending. They are committed to “forcefully lifting consumption” and driving demand, but the specific details of their plans remain unclear. Authorities have resisted proposals to distribute cash to consumers, with President Xi Jinping warning against overreliance on welfare programs.

Economic Slowdown and Efforts to Encourage Growth

Economic growth slowed in the last quarter, reaching its weakest level since early 2023. Policymakers have introduced large interest-rate cuts and support measures for the property and stock markets. A $1.4 trillion debt swap program has been rolled out to help reduce local government debt and provide more room for growth-promoting investments.

Investment and Property Sector Struggles

Although net bond financing reached 1 trillion yuan ($138 billion) for 4 consecutive months through November, investment has not yet picked up significantly. Fixed-asset investment grew by 3.3% in the first 11 months of 2024, slowing compared to earlier in the year. Meanwhile, property investment fell by 10.4%, showing continued weakness in the real estate sector despite some recovery in housing sales and easing price declines.

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