China’s economy showed signs of resilience in October as retail sales experienced a significant jump, but the country’s beleaguered property sector remains a persistent drag, despite a flurry of government stimulus measures aimed at boosting growth.
The mixed economic data highlights the challenges Beijing faces in balancing recovery efforts as it deals with long-term real estate woes and global uncertainties.
Retail sales in October rose by 4.8% year-on-year, marking the largest increase in eight months, according to official data from China’s National Bureau of Statistics. The surge in consumer spending is a positive sign for the world’s second-largest economy, with the rise surpassing economists’ expectations of 3.7%. Meanwhile, industrial production expanded by 5.3%, slightly missing forecasts of 5.6%.
However, the news wasn’t all positive. The property sector, a key pillar of China’s economic growth, continued its downward spiral. New home prices across 70 major cities dropped 0.5% from September, marking the 16th consecutive month of price declines. Year-on-year, new home prices fell by 5.9%, the steepest drop since 2015. Meanwhile, investment in real estate shrank further, falling by 10.3% over the first ten months of the year.
Despite the continued pressure on the property market, policymakers have rolled out an array of stimulus measures aimed at spurring economic activity. These include interest rate cuts, encouraging stock buybacks, and a recent debt refinancing package for local governments, many of which have been struggling under the weight of the prolonged property slowdown.
Carlos Casanova, Senior Economist for Asia at UBP, noted the disappointing real estate numbers, emphasizing that government measures have had “limited spillovers” in addressing the sector’s deep-rooted issues.
“It’s going to take more policy support to get us there,” he said.
Casanova referred to the need for stronger intervention in the housing market to restore confidence.
While the property sector continues to weigh heavily on the economy, retail spending was a bright spot in October’s data. A rise in consumption—particularly in services—suggests that Chinese consumers are gradually regaining confidence, albeit cautiously. A key gauge of value-added services rose by 6.3%, the highest in 2024.
Economists are optimistic that the improvement in retail sales could provide some momentum for the broader economy, though they caution that long-term consumer confidence will remain tied to the health of the property market.
“We can’t overstate how important the property market is for consumer sentiment… Combined with a weak labor market, it’s a major reason why confidence is so low,” said Katrina Ell, Senior Economist at Moody’s Analytics.
Zichun Huang, China economist at Capital Economics, agreed, noting that the recent improvements in retail trade, driven by consumption, are encouraging, but added that property support measures may only be providing “some relief” to the housing market. She also pointed to a potential acceleration in fiscal spending to maintain growth, though she acknowledged that ongoing uncertainty surrounding the US-China trade relationship could complicate matters.
China’s housing market remains mired in a slump, and economists say the current policy measures have yet to generate the significant momentum needed to reverse the trend. Fixed-asset investment growth, another key indicator of economic health, remained weak at 3.4% year-on-year in the first ten months of 2024, missing expectations of 3.5%.
Despite a series of stimulus packages—including interest rate cuts and reduced restrictions on property purchases—consumer and investor sentiment remains subdued. Many analysts believe that the government’s failure to provide a comprehensive fiscal stimulus targeted at boosting domestic demand is a key issue.
“We’ve been waiting and waiting for more meaningful stimulus… and now it seems like we’re in another waiting game to see how aggressive Donald Trump will be,” Ell said.
The threat of a more adversarial US trade policy under a potential Trump presidency is adding to the economic uncertainty.
“While the Trump presidency clearly increases downward pressure on China’s growth, how and when the US enacts its trade/tariff policies remains uncertain,” Barclays economists noted.
As Beijing’s economic policy makers prepare for a key policy meeting in December and upcoming legislative meetings in March, the outlook for China’s economic recovery remains uncertain. Economists expect that any new fiscal packages from the government will be phased in as Beijing closely monitors developments in US trade policy and the broader global economic environment.
The Financial Times, and the Wall Street Journal contributed to this report.
