China’s economic challenges persisted in November, as retail sales growth fell below expectations, reflecting waning consumer confidence and a deepening slump in the real estate sector. According to data released by the National Bureau of Statistics, retail sales rose by just 3% year-on-year in November, sharply below the 4.6% forecast by economists polled by Reuters and marking a slowdown from October’s 4.8% growth. The decline followed October’s boost from the Singles’ Day shopping festival, which began earlier than in 2023.
The real estate sector continued to weigh heavily on the world’s second-largest economy, with property investment for the January-November period contracting by 10.4% from a year ago, a deeper decline than the 10.3% reported in the January-October period. Beijing’s measures to stabilize the property market have yet to significantly revive demand, as falling home prices and a prolonged property downturn continue to deter buyers.
Despite these setbacks, industrial production showed a slight improvement, rising 5.4% year-on-year in November, marginally exceeding expectations of 5.3%. Fixed asset investment growth, however, remained sluggish, increasing 3.3% year-to-date through November, below the anticipated 3.4%.
The Chinese economy, already grappling with high unemployment, local government debt risks, and weak consumer and business sentiment, saw only limited effects from recent stimulus measures. Economist My Bui from investment management firm AMP noted that while China’s GDP growth is on track to reach 5% this year, weak consumption sentiment driven by falling home prices and economic uncertainties remains a significant hurdle.
In November, the urban unemployment rate held steady at 5%, but the youth jobless rate remains elevated, last reported at 17.1% in October. Consumer inflation slowed to a five-month low of 0.2% year-on-year, and the producer price index fell for the 26th consecutive month, signaling continued deflationary pressures. Imports dropped 3.9%, reflecting weak domestic demand, while exports rose 6.7%, below expectations.
To counter these headwinds, Chinese policymakers have pledged to implement proactive fiscal measures and moderately loose monetary policies in 2024, with a renewed focus on boosting domestic consumption. Recent steps include interest rate cuts, eased property purchase restrictions, and a five-year, 10 trillion yuan program to address local government debt.
Although trade-in programs for used goods have bolstered sales of home appliances, furniture, and cars, broader consumption-focused policies are yet to materialize. Specific plans to stimulate demand are expected to be unveiled at China’s annual legislative sessions in March.
