China’s economic landscape continues to show signs of imbalance as November’s real activity data highlights persistent issues of strong supply coupled with weak demand. While encouraging, these findings, as documented by economists Hunter Chan and Shuang Ding, point to continued and alarming malformations in the country’s economic structure.
In November, China’s year-on-year growth of services production index fell by 0.6 percentage point to 4.2%. This drop is due in large part to the economic sectors – especially real estate, residence services, and tourism – that have never fully rebounded. Growth of industrial production (IP) has slightly cooled by a tenth of a percentage point to 4.8% YoY. Even with this decline, it still maintains a healthy 5.1% two-year compound annual growth rate (CAGR).
Retail sales are doing worse on many measures than the industrial sector. They have fallen to just 1.3% YoY growth, the slowest rate since the depths of 2022. This market downturn is reflective of a broader growing consumer confidence and spending power crisis hitting the nation’s economy. In addition, fixed asset investment (FAI) showed a very negative universality, declining for the 10th month in a row in November.
In spite of these losses, China’s export growth bounced back to 5.9% y-o-y, delivering the positive stimulus production activity so desperately needed. Hunter Chan and Shuang Ding emphasized this point, stating, “The rebound in export growth (5.9% y/y) supported production activity.” That boost in exports is what drove the month-over-month acceleration in industrial production growth in November.
The overall economic outlook remains cautious. Analysts from fxstreet noted that “weaker-than-expected October-November data indicates softer quarter-on-quarter growth momentum from Q3.” This static observation further leads us to question China’s capacity to maintain such high levels of economic growth in the face of obvious headwinds.
The identification of imbalances is the foremost domestic challenge in the coming period. To address these problems, the central government will sell ultra-long-term central special bonds. This step is intended to subsidize consumption and boost the economy starting in 2026.
It’s widely expected that China’s economy expanded by 4.4% year-on-year in the last quarter. For 2025, we project the annual growth rate will climb all the way up to 4.9%. Economic challenges for the nation are seismic. To help stabilize and revitalize the economy, when it does act, it will prioritize restoring the balance between supply and demand.