China’s latest batch of mixed economic data unlikely to quash growth worries

SHANGHAI – China’s economic recovery remains patchy as industrial production beat expectations but retail sales fell short, putting more pressure on Beijing to roll out supportive policies to juice growth.

Industrial output rose 6.6 per cent in November from a year earlier, the National Bureau of Statistics (NBS) said on Dec 15. While that beat a median estimate for a 5.7 per cent increase, the figure was distorted by comparisons to 2022, when Covid-19 lockdowns were throttling activity.

Retail sales expanded 10.1 per cent, slower than a projected 12.5 per cent jump, underscoring the threat posed by weak consumer demand to China’s economy.

“Discounting the base effect, it’s obvious that China’s economy slowed further in November, especially in terms of retail sales and property,” said Dr Larry Hu, head of China economics at Macquarie Group. Retail sales fell 1.9 per cent in November from October on a sequential basis, according to his latest estimates.

Chinese President Xi Jinping’s government is under pressure to ramp up supportive measures for the economy. The nation’s post-pandemic recovery has been hampered by a lingering real estate crisis, while deflationary pressures are a sign of stubbornly weak consumer confidence.

“There are still a lot of external instabilities and uncertainties, and the domestic demand appears insufficient,” the NBS said in a statement. “The economy’s recovery foundation needs to be solidified.”

The People’s Bank of China on Dec 15 made the biggest net injection of cash via a one-year policy tool on record. The move will give banks more money to buy government bonds issued to support infrastructure spending.

Analysts said the injection decreased the chances of an imminent cut to the required amount of money banks must hold, a number known as the reserve ratio requirement.

China stocks extended early gains after the release of the data. The Hang Seng China Enterprises Index was up more than 3 per cent in the morning session.

Sentiment was also buoyed by a relaxation of home-buying curbs in Beijing and Shanghai, the central bank’s cash injections and separate data that showed home prices fell at a slightly slower pace in November, the first improvement in months.

At two recent conclaves on 2024’s economic policy, top leaders emphasised they will seek “progress” and strengthen fiscal policy “appropriately”. That fuelled expectations they may set an ambitious growth target and significantly expand the official budget deficit again.

The November data will be “sufficient” to assure that China meets its official target in 2023, according to ANZ senior China strategist Xing Zhaopeng.

“Now, the biggest question to the market will be next year’s growth target, which will be disclosed in March,” he said, adding that China’s central bank should “do something against the headwinds”. BLOOMBERG