China’s Economy Picks Up, but Still Needs More Help
Signs of some improvement after a recent wave of stimulus, though concerns about Trump loom
Chinese industrial production slowed slightly in October and the real-estate sector remained in a deep slump, data published Friday showed. But retail sales popped higher and investment in buildings, equipment and other fixed assets held steady.
Most economists think China’s economy is back on track to meet the government’s goal of around 5% growth this year, after authorities in September cut interest rates and pumped up the stock market with pledges of financial support. Last week, they announced a $1.4 trillion plan to help cash-strapped local governments manage their swollen debts.
But with President-elect Trump heading back to the White House, China’s economic outlook has darkened. Trump on the campaign trail said he would raise tariffs on all Chinese imports into the U.S. to 60%, a move aimed at narrowing the U.S.’s yawning trade deficit and rebuilding American manufacturing.
Economists say such a move, if enacted, would pummel China’s economy, especially if other countries followed suit with tariffs and other duties to shield their domestic industries from Chinese goods redirected from the U.S.
Weakening exports, long a bright spot for China’s economy, would pile pressure on Beijing to fire up domestic spending with further interest rate cuts and more government borrowing to finance extra spending. In particular, Chinese authorities will need to find ways to bring a drawn-out property crunch to an end and spur a durable revival in consumption, economists say.
In all, the boost to growth from easing measures so far is likely to prove short-lived unless there is “substantial” fiscal stimulus next year, Zichun Huang, China economist at Capital Economics, told clients in a research note Friday. “We think the economy will start to slow again by the second half of next year, by which point Chinese manufacturers will also be facing the additional headwind of a second trade war with Trump,” she wrote.
Figures released Friday show retail sales in China rose 4.8% in October compared with a year earlier, a stronger reading than the 3.2% increase recorded in September and the 3.7% growth expected by economists polled by The Wall Street Journal.
Consumption benefited from government programs aimed at persuading households to trade in old home appliances for discounted new ones. Given the still-fragile housing market and subdued consumer confidence, economists say it is too early to say if October’s pickup in retail sales marks the start of a durable rebound in consumption after previous false dawns.
Other data were less upbeat. Investment in buildings, equipment and other fixed assets rose 3.4% over the first 10 months of the year when compared with the same period in 2023. That matched the 3.4% rise in January through September, though it came under the 3.5% growth rate expected by economists surveyed by the Journal.
Industrial production slowed somewhat in October, rising 5.3% from a year earlier, compared with September’s 5.4% year-over-year increase, the National Bureau of Statistics said.
In the troubled real-estate sector, property investment fell 10.3% January through October compared with the same 10 months last year, a steeper decline than the 10.1% fall recorded January through September. New construction tumbled 22.6% in the first 10 months, also a bigger drop from the 22.2% decline reported for the first nine months of the year.
Average new home prices in 70 Chinese cities also declined last month, though at a slightly slower rate than in September, according to calculations by The Wall Street Journal based on data released by the National Bureau of Statistics.
Unemployment in October edged down to 5%, the statistics agency said, from 5.1% the previous month.