In October, China reported both strong growth in retail sales and a decline in real estate investment, suggesting that its recent stimulus push has had an impact on an otherwise slumping economy.
Growth in Retail Sales from September
According to the Chinese National Bureau of Statistics, retail sales in China grew by 4.8% year-on-year, surpassing the 3.8% forecast in a Reuters poll and rising from the 3.2% growth reported in September.
Industrial Production Is Short of Expectations
Industrial production also continues to grow, though it has fallen short of expectations. Industrial production rose by 5.3% year-on-year, while a 5.6% growth rate was expected. Fixed asset investment reported a rise of 3.4%, while a 3.5% growth rate was expected.
Real Estate Investment Continues to Decline
Contrasting these is real estate investment, which during the January to October period declined by 10.3% from last year. The January to September period observed a 10.1% drop, suggesting that property investment is continuing to decline in China. The sharpest real estate decline for China was in August 2021, which saw a 10.9% year-to-date fall according to data from Wind Information.
As of late September, China pledged to stop the real estate market’s decline. On Friday, November 8, National Bureau of Statistics spokesperson Fu Linghui stated that the sector was witnessing “active improvement,” despite the continued slump.
Optimism for Recovery and Stabilization
According to Bruce Pang, chief economist and head of research for Greater China at JLL, the commercial real estate company anticipates that the government’s move will likely lead to recovery in the Chinese real estate sector, with stabilization occurring in the next 12 to 18 months.
He pointed to the fact that the value of new properties sold only fell by 20.9% in the first ten months of this year, which is an improvement from the 22.7% drop reported in September. The sales decline appears to be improving over the past few months.
Other Economic Trends and Responses
Aside from real estate investment, infrastructure and manufacturing investments increased in October compared to September.
Unemployment rates in cities decreased slightly from 5.1% in September to 5% in October, though the unemployment rate for those aged 16 to 24 and not in school is released following the unemployment rate for other age groups. That statistic also decreased from 17.6% in September, which had itself decreased from 18.8% in August.
Despite small improvements, the National Bureau of Statistics called for increased policy implementation efforts in order to achieve the annual growth target, with Chinese authorities increasing stimulus announcements ever since late September. The central bank has cut interest rates and extended support in real estate.
Coinciding with these efforts, the Ministry of Finance announced a $1.4 trillion program for addressing problems of local government debt, suggesting that further support could arrive as soon as next year.
That said, domestic demand and consumer spending have reflected growing caution among the public, with the consumer price index rising by 0.2% from last year. China’s Golden Week holiday had low expectations for spending, but the Singles Day shopping festival reportedly beat expectations.
China Nears Its Growth Target
As it stands, China’s gross domestic product has grown by 4.8% this year, with its target for growth sitting around 5%. Despite decreased spending and a drop in the real estate market, the country is still positioned to reach its goals by the end of the year, if not exceed them. If changes to address the problems faced by the property sector prove to be effective, the Chinese economy will continue to grow at a respectable rate.
