China’s industrial output showed a slight improvement in November 2024, offering a glimmer of hope for an economy struggling with weak domestic consumption and looming trade challenges. However, lackluster retail sales growth underscored the pressing need for more aggressive stimulus measures as the nation braces for potential economic turbulence under a second Trump administration in the United States.
The mixed economic data, released by the National Bureau of Statistics (NBS) on Monday (Dec 16), highlights the delicate balancing act facing Chinese policymakers. With trade tensions set to escalate and domestic consumption failing to rebound strongly, Beijing is under mounting pressure to unveil measures to shore up economic stability heading into 2025.
China’s industrial output grew 5.4% year-on-year in November, edging up from October’s 5.3% growth and beating the 5.3% forecast in a Reuters poll. This uptick was driven by modest gains in manufacturing and infrastructure-related activities, reflecting the partial success of recent policy easing measures aimed at boosting production.
Key sectors, such as electric vehicles and renewable energy, continued to perform well. However, analysts warn that the boost from industrial production may not be sustainable, especially as external demand wanes amid global economic uncertainties.
“China’s economy appears to have slowed last month, despite tailwinds from recent policy easing,” said Julian Evans-Pritchard, head of China economics at Capital Economics. “We doubt that stimulus can deliver anything more than a short-lived improvement, not least because the current strength of export demand is unlikely to last once President Trump starts to put some of his tariff threats into action.”
In stark contrast, retail sales—a key indicator of consumer spending—grew just 3.3% year-on-year in November, a significant deceleration from October’s 4.8% increase. The result fell well short of analysts’ expectations of a 4.6% rise, despite robust online shopping promotions during the Singles’ Day shopping festival and government-subsidized trade-in programs aimed at spurring auto sales.
The sluggish retail performance underscores the fragility of China’s consumer sector, which has struggled to rebound from the COVID-19 pandemic and ongoing economic headwinds. Policymakers face the challenge of restoring consumer confidence, particularly as household savings remain heavily tied up in the struggling real estate sector.
NBS spokesperson Fu Linghui sought to reassure markets, stating that the broader trend of recovery in consumption had not reversed. However, he acknowledged that more targeted efforts would be needed to sustain economic momentum into 2025.
Fixed asset investment (FAI), another critical pillar of China’s economy, also showed signs of fatigue. FAI grew 3.3% in the January-November period compared to the same period a year earlier, down slightly from the 3.4% growth recorded in January-October. While infrastructure investment provided some support, weak private-sector investment and cautious sentiment in the real estate market weighed on overall performance.
The property market—a cornerstone of China’s economy—remains a significant drag. Although new home prices fell at their slowest pace in 17 months in November, signaling some stabilization, the sector continues to struggle with weak demand and excess inventory. Policymakers have introduced measures to support the sector, including cutting mortgage rates, lowering down-payment requirements, and offering tax incentives. However, analysts believe a meaningful recovery in real estate may still be a long way off.
“Most analysts say a sure-footed recovery in the real estate sector appears to be some way off,” noted Hao Hong, chief economist at Shanghai-based GROW Investment Group.
The economic data comes on the heels of last week’s Central Economic Work Conference (CEWC), an annual agenda-setting meeting where China’s top leaders outlined their priorities for the coming year. Officials pledged to increase the budget deficit, issue more government debt, and place a stronger emphasis on boosting consumption.
The CEWC also reiterated an “appropriately loose” monetary policy stance, marking a departure from the cautious approach of recent years. This shift, which includes targeted measures to spur domestic demand, reflects Beijing’s recognition of the structural challenges facing the economy.
“They’re talking about unconventional policy moves, moderately loosening monetary policy, and promoting domestic consumption,” said Hao Hong. “It’s showing that it’s gaining a lot of attention from the top.”
However, the immediate impact of these measures is likely to be limited. Hong noted that concrete stimulus plans may not materialize until March 2025, when China’s “two sessions”—annual meetings of the legislature and top political advisory body—are expected to detail specific economic policies.
Adding to Beijing’s challenges is the prospect of heightened trade tensions with the United States. President Donald Trump, who will begin his second term in January, has pledged to impose tariffs exceeding 60% on Chinese imports. This would mark a significant escalation in the trade war and could shave up to 1 percentage point off China’s GDP growth in 2025, according to a Reuters poll.
In response, Chinese policymakers have reportedly considered allowing the yuan to weaken to offset the impact of US tariffs. However, state media outlet Xinhua emphasized Beijing’s commitment to maintaining the yuan’s basic stability, reflecting the leadership’s cautious approach to managing currency policy.
With traditional monetary tools like interest rate cuts yielding diminishing returns, analysts are calling for more innovative approaches to stimulate the economy. Hao Hong suggested measures such as increasing healthcare reimbursements and raising minimum wages to bolster household spending power.
“These are the kinds of structural reforms needed to drive long-term growth and ensure economic stability,” Hong said.
Looking ahead, China’s economic prospects remain uncertain. While policymakers are committed to achieving a growth target of around 5.0% next year, the dual pressures of weak domestic demand and escalating US trade tensions pose significant risks.
GDP growth of 4.5% in 2025, down from an estimated 4.9% this year. The anticipated slowdown underscores the urgency for Beijing to implement effective stimulus measures and navigate the complex interplay of domestic and international challenges.
