Chinese economy needs more help
Chinese policymakers are suddenly sending much stronger signals to support growth. The latest big data release for 2021, released on Wednesday, shows why.
November economic figures show consumers are struggling, the industry is moving sideways and the real estate sector is still struggling, albeit with provisional signs of a sales dip and intense industrial activity . The Chinese economy is still in serious trouble and more political support, both fiscal and monetary, will be needed to avoid an even deeper slowdown next year. Growth numbers heading into spring will at least be presented in a slightly more flattering light compared to a weak period the year before.
When it comes to November data, the good news was mostly incremental. Industrial production soared for the second month in a row, reaching 3.8% year-on-year from 3.5% in October. As in October, however, the strength was concentrated in the mining and power sectors, which continue to rebound steadily after the dilution of safety and environmental restrictions that led to widespread blackouts early in the year. autumn. Growth in the manufacturing sector reached 2.9% year-on-year from 2.5% in November, but remains well below late-summer levels of around 6%. Growth in the mining sector, on the other hand, climbed to 6.2%, its strongest since late 2019. Growth in the electricity, heating and water supply sector was 11.1% .
The news for consumers was even worse. After a modest rebound to 4.9% growth in October, retail sales growth fell back to 3.9% last month, likely reflecting the impact of a new limited coronavirus outbreak and the authorities’ severe response .
The housing picture, which remains the real key to economic recovery and protection against financial risks, has been mixed. On the one hand, prices in many medium-sized cities have fallen again. And year-over-year growth in heavy industrial production, area sold and new housing starts remains deeply negative. On the other hand, sales of floor space edged up month over month. And while residential investment was down again year over year, the pace of the decline slowed for the first time this year. Steel rebar futures prices have also rallied slightly in Shanghai in recent weeks. Some of the recent policy measures to support home loans may start to have an effect on margins.
Overall, Wednesday’s data release still paints a very worrying picture at the end of the year. Policymakers still have their work cut out for them to make sure things don’t get worse in 2022.
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Write to Nathaniel Taplin at [email protected]
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