China’s growth momentum diverged in November

January 08, 2025

Despite widespread improvements in October, the Chinese economy presented a mixed picture in November, with industrial production remaining relatively strong, while retail sales growth slowed. December is unlikely to have seen a significant change in this trend: not only are consumer confidence levels still in negative territory, but factory activity growth failed to meet expectations.

Given the decisions made at the Central Economic Work Conference (CEWC) in December, we expect growth in 2025 to benefit from stronger fiscal and monetary policy support. This could push the Chinee economy past our 2025 GDP growth forecast of 4.5%; though it remains to be seen how effective this support will be in expanding domestic demand – and especially consumer spending – given the underlying structural weaknesses that are dragging confidence levels down.

Trusted Insights for What’s Ahead^®

• Status of China’s Economy: Economic activities turn in a mixed performance
  Supply-side data including industrial value added and the manufacturing PMI expanded solidly in November, reflecting the positive impact of stimulus measures. In contrast, the demand side of the economy continues to lag, affected by the ongoing property downturn and persistent weakness in consumer confidence.
• Investment Trends: Manufacturing remains robust but property contracts further
  Fixed asset investment (FAI) grew 3.3% y-o-y in Jan-Nov, down from 3.4% in the Jan-Oct period. Manufacturing investment remained robust (9.3% in Jan-Nov and Jan-Oct) and infrastructure investment moderated slightly (4.2% in Jan-Nov vs. 4.3% in Jan-Oct). Property investment continued to contract (-10.4% in Jan-Nov vs. -10.3% in Jan-Oct). Looking ahead, manufacturing investment will benefit from stronger policy support, but will be weighed down by weak demand and external uncertainties.
• Consumption Trends: Persistent confidence weakness equals a modest outlook for consumption
  Retail sales growth slowed to 3.0% y-o-y, down from 4.8% in October. The dip was driven by a high comparison base (10.1% growth in November 2023) and the early start of this year's "Singles Day" festival. However, the government’s consumer trade-in program boosted sales of cars and white goods. At December’s CEWC, China’s top leadership decided to intensify stimulus measures in 2025, with the number one task being the expansion of demand, especially consumer spending.
• Trade Trends: Chinese export growth slows, and potential tariff hike clouds the outlook for 2025
  Export growth slowed to 6.7% y-o-y in November, from 12.7% in October. This was due to a high comparison base and weak external demand. Looking ahead, the anticipated increase in import tariffs by the incoming US administration will cloud export growth in 2025.