China’s economy is facing a tough time as it struggles to recover from recent challenges. In November, key indicators like consumption, investment, and industrial growth did not meet expectations.
Retail sales only increased by 1.3% compared to last year, falling short of the expected 2.8%. This slowdown is noticeable, especially since it dropped from a 2.9% increase in October. Industrial production grew by 4.8%, but again, that was below the anticipated 5%.
Investment in fixed assets, like property, fell by 2.6% in the first eleven months of this year, more than the 2.3% predicted by experts. This marks the biggest decline since the pandemic. Real estate investment saw a staggering drop of 15.9%, worsening compared to the 10.3% drop the previous months.
The property sector remains weak, with home prices in major cities like Beijing and Guangzhou dropping by 1.2% and resale prices decreasing by 5.8%.
In the auto industry, sales dipped for the first time in three years, down 8.1% compared to last year as local governments paused trade-in subsidies. Despite an extended promotional period for the Singles’ Day shopping event, overall retail growth slowed to just 12%, down from 20% last year.
Policy experts are discussing the need for more proactive measures. The Chinese finance ministry plans to introduce long-term bonds to fund projects aimed at improving national security and consumer goods. Analysts, however, worry that this may not be enough. Zavier Wong from eToro emphasizes that until job opportunities and wages improve, it’s challenging to boost consumer spending.
The urban unemployment rate remains at 5.1%, with youth unemployment significantly higher at 17.3%. Although there is some optimism about meeting the growth target of around 5%, supported by a significant trade surplus of $1.1 trillion this year, questions still linger. Kristalina Georgieva from the International Monetary Fund has urged China to speed up domestic support.
Eswar Prasad from Cornell University highlights that while the government aims to balance growth and enhance household consumption, specific actionable steps are yet to be seen. The situation puts China’s economy in a delicate balance between boosting domestic demand and reliance on exports.
In summary, while there are efforts to stimulate growth, the path forward requires urgent reforms to strengthen the labor market and enhance private sector confidence.
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