BANGKOK — In a recent announcement, Chinese retail sales exhibited a slowdown in November, alongside a notable decline in housing prices, according to government data released on Monday. Despite a series of stimulus initiatives implemented in recent months, consumer demand remains tepid.
This report follows an annual planning meeting in Beijing, where key leaders concluded discussions without unveiling significant new policy measures. They did, however, affirm a commitment to encourage both consumer and business spending. Analysts interpret this as an indication that the ruling Communist Party is preparing to take further action, particularly in response to potential tariff increases on Chinese imports, as threatened by incoming U.S. President-elect Donald Trump.
The National Bureau of Statistics indicated that the economy remains stable, with the unemployment rate holding steady at 5%. Fu Linghui, a representative from the Bureau, commented on the broader economic landscape, stating, “We need to recognize that the external environment is becoming increasingly complicated, domestic demand remains insufficient, and several enterprises are struggling with production and operational issues.” He emphasized that a strong foundation for sustainable economic recovery is still necessary.
Retail sales experienced a modest increase of 3% year-on-year, a drop from October’s 4.8% growth and lower than the 3.5% average from January to November. Notably, consumers have been cautious, particularly in discretionary spending areas such as cosmetics, alcohol, and clothing. In contrast, there was a significant uptick in appliance and vehicle purchases, largely fueled by a government incentive program aimed at encouraging upgrades to energy-efficient appliances and electric vehicles.
In November, automobile sales increased by 6.6% compared to the previous year; however, overall sales have decreased by 0.7% year-to-date. Meanwhile, appliance sales surged more than 22% for the month, contributing to a 9.6% increase so far this year. Government programs like cash-for-clunkers and appliance recycling initiatives have played a crucial role in maintaining factory activity, benefitting from President Xi Jinping’s focus on developing high-tech industries for superior quality.
During their recent strategic meeting, top Chinese officials emphasized a commitment to a more dynamic approach to invigorating the economy, albeit without disclosing specific stimulus plans. Additionally, on the same day, the government revealed an initiative aimed at overhauling the entire retail framework over the next five years, with projects intended to modernize retail locations across the nation, creating new commercial hubs focused on shopping, dining, and entertainment.
However, the outlined plans do not address underlying issues that many economists believe are prompting households to prioritize savings over spending. Key factors contributing to this behavior include job instability, falling property values, and stagnant income growth. A report from Oxford Economics highlighted these concerns, indicating that consumer spending is ultimately reliant on income growth and the tendencies of households to save during uncertain economic times.
Investment trends in fixed assets, such as factories and housing developments, also appear to have slowed. The latest statistics reveal that property prices have fallen and home sales declined in various cities, reflecting the ongoing troubles within China’s real estate market following regulatory crackdowns on developer borrowing that triggered a significant industry crisis.
The economic repercussions of the COVID-19 pandemic continue to exert downward pressure on China’s economy, despite some recent policy easing efforts. Analyst Julian Evans-Pritchard from Capital Economics noted, “China’s economy seemed to decelerate last month, despite supportive policies. While growth might recover this quarter, the weak data from November illustrates the complexities policymakers face in fostering a durable recovery.”
After a recent uptrend in Chinese stocks fueled by optimism for more substantial stimulus measures, the markets reacted on Monday with Hong Kong’s Hang Seng index dipping by 1%, while the Shanghai Composite index fell by 0.2%. The Hang Seng property index also experienced a 1.3% decline.
Evans-Pritchard expressed skepticism regarding the ability of the current stimulus measures to create long-term improvements, particularly as the sustainability of export demand may falter once Trump implements his proposed tariffs.
