Image : Employees work on a production Industry
Can Beijing balance, in economic landscape in November 2024 presented a mixed picture, with industrial output growth slightly accelerating while retail sales fell short of expectations. This divergence underscores the pressing need for Beijing to recalibrate its economic strategy as it faces potential headwinds from escalating U.S. trade tensions under a second Trump administration.
Data from the National Bureau of Statistics (NBS) showed that China’s industrial output rose by 5.4% year-on-year in November, a modest uptick from October’s 5.3% growth and slightly above market forecasts of 5.3%. This improvement highlights the resilience of China’s manufacturing sector, which has been a cornerstone of its $19 trillion economy.
Despite these gains, concerns remain about overcapacity in certain industries. As Dan Wang, an independent economist in Shanghai, noted, China’s policy emphasis on production over consumption may exacerbate existing challenges. “While industrial capacity strengthens, it could lead to increased reliance on overseas markets for excess output,” Wang warned.
Retail sales, a key indicator of domestic consumption, grew by just 3.0% in November, marking the slowest pace in three months. This was a significant drop from October’s 4.8% rise and fell short of analysts’ expectations of a 4.6% increase.
Xu Tianchen, a senior economist at the Economist Intelligence Unit, attributed part of this slowdown to the early onset of the “Double 11” shopping festival, which shifted sales to October. However, Xu emphasized that consumer demand remains fragile, heavily reliant on government subsidies, which contributed an estimated 1.5-2 percentage points to the monthly retail figures.
Fixed asset investment grew by 3.3% from January to November compared to the same period last year, slightly below expectations. The ongoing property sector crisis, with approximately 70% of household savings tied up in real estate, continues to weigh heavily on consumer confidence and broader economic stability.
Although new home prices declined at the slowest rate in 17 months, analysts remain cautious about declaring a recovery in the property market. Stabilizing this sector, which at its peak contributed 25% to GDP, is critical for Beijing to achieve its 2025 growth targets.
The return of Donald Trump to the White House raises the specter of heightened trade tensions. Trump’s pledge to impose tariffs exceeding 60% on Chinese goods could force Beijing to accelerate its transition toward a consumption-driven economy—a shift that has been debated for over two decades.
The prospect of new U.S. tariffs could shave up to 1 percentage point off China’s GDP growth in 2025, according to a Reuters poll. Policymakers are bracing for these challenges by pledging increased fiscal spending, higher debt issuance, and a more flexible monetary policy.
At the recent Central Economic Work Conference (CEWC), China’s leaders committed to boosting consumption and adopting an “appropriately loose” monetary policy—the first such easing in 14 years. These measures aim to counteract the slowdown in retail sales and stabilize the broader economy.
Moody’s Ratings recently revised China’s 2025 GDP growth forecast upward to 4.2% from 4.0%, reflecting cautious optimism about the impact of these policy interventions. However, analysts like Julian Evans-Pritchard of Capital Economics remain skeptical about the long-term efficacy of stimulus measures. “While growth may pick up in the coming months, sustained recovery is unlikely, especially with potential export demand weakening under new tariff regimes,” he observed.
China’s economic journey toward 2025 is fraught with challenges, from domestic consumption shortfalls to external trade pressures. Policymakers face the delicate task of balancing industrial growth with measures to invigorate consumer demand while navigating a volatile global trade environment.
As Beijing steps up its stimulus efforts, the effectiveness of these policies will be closely watched. Achieving sustainable economic growth will require not only short-term fixes but also structural reforms to foster a more consumption-driven economic model. The stakes have never been higher as China strives to maintain its position as a global economic powerhouse in the face of mounting challenges.
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