As of November 2024, China’s economy faces mounting challenges, with signs of recovery in consumer spending overshadowed by weaknesses in industrial output and a struggling property market. Coupled with the resurgence of US-China trade tensions under Donald Trump’s re-election, these factors highlight the fragility of the world’s second-largest economy.
Retail sales rose by 4.8% year-on-year in October, the fastest growth since February, driven by strong Golden Week and Singles’ Day sales. This reflects a partial recovery in consumer confidence, aligning with Beijing’s push toward a consumption-driven economy. However, this progress remains insufficient to offset broader economic stagnation. Industrial production grew by 5.3%, falling slightly below expectations, while fixed-asset investment remained stagnant at 3.4% year-to-date. Weak global demand and lingering supply chain uncertainties continue to dampen growth in manufacturing, underscoring the cautious sentiment among businesses.
The property sector, accounting for 30% of GDP, remains a critical drag on China’s economy. Home prices fell for the 16th consecutive month in October, with a 0.5% month-on-month drop, marking the steepest annual decline since 2015. Developer crises, notably at Evergrande, have eroded investor confidence and limited the effectiveness of government stimulus measures. Property developers have reported dwindling sales, further compounding liquidity pressures, which could lead to broader financial instability if left unchecked.
To combat these issues, Beijing has implemented interest rate cuts, with the loan prime rate at a record low of 3.45%, alongside a $1.4 trillion stimulus package targeting infrastructure and local government debt. Despite these measures, household savings hit 38% of disposable income, reflecting widespread uncertainty and reluctance to spend. Small businesses, a key driver of employment, have also expressed concerns over access to affordable credit and weaker domestic demand.
Furthermore, Trump’s return to office raises concerns about the possibility of renewed trade conflicts. His administration has signaled potential tariffs of up to 60% on Chinese goods, threatening China’s export-driven industries and global supply chains. Such policies could further destabilise China’s fragile recovery and amplify global economic uncertainties, especially as global investors remain cautious about potential deglobalisation trends. The repercussions of these tensions may extend beyond bilateral trade, influencing international commodity prices and reshaping supply chains.
China’s economic outlook is at a crossroads. While consumer spending shows signs of revival, structural issues in the property sector, subdued industrial growth, and external risks like US trade policies present significant headwinds. The country’s ability to stabilise its economy will be crucial not only for its population but also for the broader global economy, as markets and governments worldwide remain deeply intertwined with China’s economic trajectory.
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