China’s investment slumped further and retail sales expanded at their weakest pace since the crash caused by the COVID-19 pandemic, in another month of lopsided growth that is inflaming trade tensions with the rest of the world.
While factory output is seeing little pullback, retail sales rose just 1.3 percent last month from a year earlier — the slowest figures on record, outside the pandemic, official data released yesterday showed. That was worse than every estimate in a Bloomberg survey of analysts, whose median forecast was for the growth pace to stay at 2.9 percent for a second month.
Fixed-asset investment also disappointed and shrank 2.6 percent in the first 11 months of the year, keeping it on track to post the first annual drop in data going back to 1998.
Photo: Bloomberg
Industrial output also fell short of forecasts, but still grew 4.8 percent from a year earlier, a sign that booming exports are keeping the production side of the economy humming. However, that is also deepening imbalances and weighing on prices as domestic demand languishes.
“With supply indicators still exceeding demand indicators, we think China’s deflation pressure could persist and its export-led growth model continue, which could lead to rising trade and investment tensions between China and non-US economies,” Barclays PLC economists said in a note.
China’s inability to revive consumer spending is leaving the economy vulnerable to risks abroad, after it relied on foreign demand to propel growth for much of this year despite the tariff war unleashed by US President Donald Trump.
Exports are forecast to slow in the months ahead after a surprisingly strong year, as protectionism spreads and trade tensions intensify with countries beyond the US.
The property sector deteriorated again, as state-backed developer China Vanke Co (萬科) moved closer to the brink of defaulting. The plunge in real-estate investment reached 16 percent in the first 11 months from a year earlier.
Home prices fell faster last month, reversing the trend of narrower declines from earlier this year.
The fading effect of the government’s trade-in subsidies was clear in the breakdown of spending figures last month. Sales of home appliances slumped 19 percent from a year earlier, the worst reading since early 2020. Car sales fell 8 percent — their biggest drop since May 2022.
The investment figure also pointed to weakening demand. It implied a contraction of about 11 percent last month from a year earlier, estimates from Goldman Sachs Group Inc and Capital Economics showed.
Natixis SA senior economist Gary Ng (吳卓殷) said “the government policies of supporting consumption and the property market are far from adequate,” even as the official goal for the economy is easily within reach this year.
“While a 5 percent real growth target is likely a done deal, 2026 will be a much more challenging year if the stress persists,” Ng said.
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