In November, China’s economic deceleration intensified, with lackluster performance in consumption, investment, and industrial output growth, as authorities worked to restrict supply while endeavoring to rekindle demand and halt the downturn in the property sector.
Retail sales experienced a 1.3% increase last month compared to the previous year, falling significantly short of Reuters’ median projection for a 2.8% rise and down from 2.9% growth in the month before.
Industrial production grew by 4.8% in November year-over-year, falling short of the 5% anticipated increase and representing its lowest expansion since August 2024.
Capital expenditure in fixed assets, which encompasses real estate, declined by 2.6% from January to November year-over-year, exceeding economists’ forecasts of a 2.3% decrease.
This decrease deepened from 1.7% in the January to October span and marked the steepest drop recorded since the pandemic’s onset in 2020, according to data from Wind Information dating back to 1992.
“The reduction in fixed asset investment and the recent fall in property prices have adversely affected consumer sentiment,” stated Zhiwei Zhang, president and chief economist at Pinpoint asset management, in a note following the statistics, foreseeing that more fiscal and monetary stimulus measures will be expected in the first quarter of the coming year.
Investment in real estate saw a 15.9% drop in the first 11 months of this year, steeper than the 10.3% decline recorded in the January to October timeframe, as the property downturn continues.
In yet another indication that the sector’s decline is still seeking a bottom, the decreases in home prices across 70 major cities sharpened in November. New home prices decreased by 1.2% in tier-1 cities including Beijing, Guangzhou, and Shenzhen, while resale home prices fell by 5.8% from the previous year.
Furthermore, economists at Golman Sachs noted last week that the slump in auto sales has significantly impacted overall retail sales, alongside the “negative distortion” from the earlier-than-usual commencement of the Singles-Day online shopping festival, which shifted some demand from November to October.
Data from the China Automobile Dealers Association indicated that auto retail sales volume in November declined for the first time in three years, falling by 8.1% year-over-year to 2.23 million vehicles, as many local administrations suspended the trade-in subsidies.
A number of online shopping platforms prolonged their promotional activities to stimulate consumer spending, running from early October through November 11, thus forming the lengthiest Singles’ Day sales duration ever. Yet, the sales outcomes disappointed as consumers tightened their spending, with gross merchandise volume increasing by only 12%, down from 20% growth last year, based on information from Syntun.
Need for rebalancing
Chinese authorities have committed to provide more policy support to stimulate domestic demand and elevate consumption and investment in the upcoming year. The finance ministry disclosed in a release on Saturday that it intends to issue ultra-long-term special government bonds next year to finance projects enhancing national security.
The funds will also be allocated for equipment upgrades and consumer goods trade-in initiatives. The ministry further committed to enhancing its budget for investment to mitigate the downturn in fixed-asset investment recently.
However, analysts seemed less hopeful given that Beijing has not yet introduced any substantial stimulus measures.
“Although we are witnessing targeted policy support, it remains challenging to foster a significant rebound in consumption without evident improvements in job prospects and wage elevations,” remarked Zavier Wong, market analyst at asset management firm eToro.
Eswar Prasad, an economics professor at Cornell University and senior fellow at the Brookings Institute, expressed apprehensions about the durability of China’s economic growth. In an opinion piece published on Sunday, the economist advocated for structural reforms to rebalance the economy, including initiatives to strengthen the labor market, enhance the social safety net, and support private enterprises.
“The government clearly aims to rebalance growth and recognizes what is necessary to enhance household consumption and increase productivity. However, there appears to be little urgency and no definitive timeline for actionable policy measures to achieve these goals,” Prasad commented.
The urban unemployment rate in November remained at 5.1%, consistent with the previous month. Youth unemployment has raised more concerns, with the latest figure for October reaching 17.3%.
Nonetheless, China’s economy looks poised to fulfill the official growth goal of “around 5%,” bolstered by a surge in exports to non-U.S. markets, despite ongoing tariff strains with Washington impacting shipments to the world’s largest consumer market.
China’s trade surplus surged to a record $1.1 trillion in November, surpassing its previous full-year record of $992.2 billion set in 2024, in merely 11 months, raising widespread apprehensions regarding its dependency on foreign demand and currency depreciation to maintain competitive export levels.
International Monetary Fund Managing Director Kristalina Georgieva last week urged China to “hasten” efforts to support domestic consumption and reduce reliance on exports for economic growth.
Ting Lu, chief China economist at Nomura, warned that elevating the renminbi, or yuan, to lower the trade surplus may not be sustainable without effective actions to eliminate economic deflation.
The trade-weighted value of the renminbi against a mix of currencies, rather than just the U.S. dollar, has appreciated by 3% from 2021 to 2025, a timeframe during which China’s exports climbed by 44.8%, according to Lu’s estimates.
“Should there be a deceleration in growth and worsening deflation, markets might shift to a bearish perspective on the RMB, leading to depreciation against the USD and its overall basket,” Lu added.
The offshore yuan has strengthened by over 3% this year to 7.0496 per dollar as of Monday, its strongest position since October of the previous year, according to LSEG data.
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