Beijing (AFP) – Retail sales in China grew last month at the slowest pace in over a year, official data showed Friday, highlighting the battle facing authorities’ efforts to counteract persistent consumer malaise. The world’s second-largest economy has been confronted with sluggish domestic spending since the end of the Covid pandemic, with a prolonged debt crisis in the property sector weighing on sentiment. Many economists argue that China must shift to a growth model driven more by consumption than infrastructure investment and exports, long the key sources of activity.
Leaders are targeting overall growth in 2025 of five percent, a goal experts say remains within reach despite an apparent slowdown in the latter half of the year. “External instability and uncertainty factors remain numerous, domestic structural adjustment pressures are significant, and the stable operation of the economy faces many challenges,” Fu Linghui, chief economist at the National Bureau of Statistics (NBS), told a news conference. Retail sales rose 2.9 percent on-year last month, data from the NBS showed, slightly lower than the three percent increase recorded in September. The figure represented the slowest increase since August of last year. It also marked the fifth straight month of slowing growth since the peak of 6.4 percent reached in May.
The spending slump last month came as Beijing and Washington worked to ease a damaging trade war, with presidents Donald Trump and Xi Jinping agreeing in October to a one-year truce. China’s exports have largely remained resilient this year despite Washington’s tariffs, with a decline in shipments to the United States offset by increases elsewhere, particularly Southeast Asia. But spurring activity in the domestic economy has been more challenging. At a Communist Party gathering last month that was focused on economic planning, leaders said the country must “vigorously boost consumption”. Moody’s Ratings warned in a report this week that China’s “domestic demand may be slow to revive”. After last month’s meeting, priorities are “accelerating innovation in strategic technologies and reinforcing domestic demand through structural improvements in income distribution and social safety nets,” the report said.
– Factory slowdown –
NBS data also showed factory activity in October fell short of expectations. Industrial production rose 4.9 percent year-on-year, lower than a Bloomberg forecast of 5.5 percent and the slowest increase since August last year. “A key drag came from weaker external demand — export values and industrial sales for export both weakened significantly,” Zichun Huang of Capital Economics said in a note about Friday’s data. “We expect the economy to remain weak over the coming quarter,” she wrote, adding that Beijing’s recent trade truce with Washington “is unlikely to provide much relief”.
China’s real estate sector has been mired in a debt crisis since 2020, having enjoyed a decades-long construction boom powered by rapid urbanisation and rising living standards. Friday data showed home values — a key store of wealth for Chinese households — continued to decline. Prices for new residential properties fell year-on-year in October in 61 out of 70 major cities surveyed by the NBS. “The housing sector still clouds the overall outlook,” wrote Sheana Yue, Senior Economist at Oxford Economics. There is “limited policymaker appetite for new housing stimulus despite fading property momentum,” she said, adding that “a nationwide turnaround remains distant”.
In another worrying sign for policymakers, fixed-asset investment in the January-October period was down 1.7 percent year-on-year. The indicator slipped into negative territory in September, falling 0.5 percent year-on-year.
© 2024 AFP
