China’s worst retail sales since Covid-19 add to growth risks

BEIJING - China’s investment slumped further and retail sales expanded at their weakest pace since the crash caused by Covid-19, 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 per cent in November from a year ago – the slowest figures on record, outside the pandemic. 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 per cent for a second month. 

Fixed-asset investment also disappointed and shrank 2.6 per cent in the first 11 months of 2025, keeping it on track to post the first annual drop in data going back to 1998.

For Mr Gary Ng, senior economist at Natixis, the conclusion is that “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 in 2025.

“While a 5 per cent real growth target is likely a done deal, 2026 will be a much more challenging year if the stress persists,” Mr Ng said.

China’s inability to revive consumer spending is exposing the economy to risks abroad, after it relied on foreign demand to propel growth for much of the year despite the tariff war unleashed by US President Donald Trump.

Exports are broadly forecast to slow in the months ahead after a surprisingly strong 2025, as protectionism spreads and trade tensions intensify with countries beyond the US.

Other than consumption and investment, industrial output also fell short of forecasts. Still, its 4.8 per cent growth from a year ago shows booming exports are keeping the production side of the economy humming. 

But the result is a lopsided economy whose deepening imbalances are weighing on prices as domestic demand languishes.

The property sector deteriorated again as state-backed developer

China Vanke moved closer to the brink of defaulting

. The plunge in real estate investment reached 16 per cent in the first 11 months from a year ago. 

Home prices fell faster in November on year, reversing the trend of narrower declines from earlier in 2025.

“The economy faced a number of challenges” in November, the National Bureau of Statistics (NBS) said in a statement. “There were many external instabilities and uncertainties, and domestic demand was insufficient.”

The slowdown in November’s consumption growth was likely caused in part by unfavourable statistical effects. China began rolling out government subsidies for house­hold purchases of consumer goods in late 2024, creating a high base of comparison. 

An earlier-than-usual start of the Singles’ Day promotions probably also contributed by prompting buyers to move forward some of their purchases to October.

The fading effect of the trade-in subsidies was clear in the breakdown of spending figures in November. Sales of home appliances slumped 19 per cent from a year ago, the worst reading since early 2020. Car sales fell 8 per cent – their biggest drop since May 2022.

“The main reason for this is the impact of the trade-in policy turning from tailwind to headwind,” said Mr Lynn Song, chief economist for Greater China at ING Groep. “This means that next year we either need to see another expansion of the trade-in policy to cover new categories, or we need to see new methods to boost consumption.”

The investment figure also points to weakening demand. It implies a contraction of around 11 per cent in November from a year ago, based on estimates from Goldman Sachs and Capital Economics. 

The slump in capital expenditure began in June and has puzzled economists due to its inconsistency with other data, leading some to raise the possibility that the authorities recently started to correct over-reporting in the statistics.

A breakdown of the latest data additionally shows a rare decline in infrastructure investment. 

The ability of local governments to invest has been curtailed by Beijing’s tightening control over their borrowing, as part of an effort to reduce financial risks. Meanwhile, the campaign to refinance the so-called hidden debt has taken up a big chunk of the money raised from bond sales, with the issuance of new special local bonds for the swap programme rising to about 70 per cent more than planned earlier in 2025.

The investment downturn appears to have set off alarms among top leaders. 

Policymakers meeting last week at a key annual gathering pledged to stop the decline, with Chinese President Xi Jinping also calling for heightened attention to the issue. The authorities could push for more big infrastructure projects in 2026 to stabilise growth.

They listed boosting domestic demand as the top priority in the new year, signalling vigilance against uncertainties in foreign trade. But despite a pledge to maintain policies supportive of growth, no aggressive measures appear to be on the cards for now.

Many economists forecast the government will set its annual growth target at around 5 per cent for 2026 – the same as in 2025 – and roll out a fiscal stimulus package of around the same size as this year, with a headline budget deficit at 4 per cent. 

The People’s Bank of China is expected to cut interest rates moderately in 2026, after taking a restrained approach to easing for much of 2025 as stocks rallied and exports boomed.

“The contraction of real estate activities and the slowdown of retail sales have been moving in tandem,” said Australia & New Zealand Banking Group chief economist for Greater China Raymond Yeung. 

“Both are cooling more rapidly in the recent months,” Mr Yeung said.

“This trend is against the leadership’s message of boosting domestic demand. The authorities will need to do something in 2026, and any policy measure has to be ground-breaking and holistic rather than piecemeal and short-lived.” BLOOMBERG