China’s economic momentum weakened further in November, with factory output growth slowing to a 15-month low and retail sales recording their weakest performance since the country abruptly lifted its strict zero-COVID measures. The data underscores the growing urgency for Beijing to find new and sustainable drivers of growth as it looks toward 2026.
As consumer trade-in subsidies fade and a prolonged property downturn continues to weigh on household spending, authorities have increasingly relied on exports to support economic activity. However, that approach is coming under pressure as China’s nearly $1 trillion trade surplus fuels rising tensions with trading partners, many of whom are considering new import barriers.
Official data from the National Bureau of Statistics showed industrial output rose 4.8% year on year in November, slowing from 4.9% in October and missing market expectations for 5.0% growth. It marked the weakest pace since August 2024.
Retail sales, a key measure of consumer demand, increased just 1.3%, down sharply from 2.9% in October and well below forecasts for a 2.8% rise. The figure was the softest since December 2022, when pandemic restrictions were lifted.
According to Xu Tianchen, senior economist at the Economist Intelligence Unit, strong export performance earlier in the year reduced the need for aggressive domestic stimulus, while trade-in subsidies have largely run their course. He added that policymakers appear focused on 2026, as this year’s growth target of around 5% remains within reach, reducing the urgency for additional stimulus in the near term.
Weak economic data weighed on Chinese equities, which were also pressured by renewed concerns in the property sector. Shares fell as major developer China Vanke moved to avoid a potential debt default.
Beijing searches for new growth solutions
Economists increasingly argue that traditional stimulus measures are losing effectiveness. The International Monetary Fund recently urged China to accelerate structural reforms and address deep-seated problems in the property sector, where roughly 70% of household wealth is concentrated.
The IMF estimates that resolving property-related stress over the next three years could cost the equivalent of about 5% of China’s gross domestic product. Officials have also acknowledged the need to restore consumer confidence, which remains subdued.
New home prices continued to decline in November, while fixed asset investment fell 2.6% in the first eleven months of the year. The drop was largely driven by a 15.9% slump in property investment, highlighting the scale of the real estate downturn. Developers continue to struggle to clear unsold housing stock, even after offering steep discounts.
China Vanke is set to hold another bondholder meeting this week after investors rejected a proposal to delay repayments, underscoring the financial strain facing the sector, which once accounted for roughly a quarter of China’s economy.
Other areas of consumption also showed signs of stress. Annual car sales fell 8.5%, the sharpest decline in ten months, dampening hopes for a year-end rebound. Even the extended Singles’ Day shopping festival failed to lift spending sentiment.
Zhang Zhiwei, chief economist at Pinpoint Asset Management, said the slowdown was broad-based, with weak retail sales particularly concerning. He noted that declining investment and ongoing property market weakness are increasingly feeding through to consumer confidence.
Rising trade headwinds add pressure
Looking ahead, policymakers are expected to stick with a growth target of around 5% next year as China prepares to launch a new five-year economic plan. However, both the World Bank and the IMF project more modest growth, reflecting structural challenges and external risks.
At a recent high-level policy meeting, Chinese leaders pledged to maintain a proactive fiscal stance to support consumption and investment, while acknowledging a widening gap between strong supply and weak domestic demand. Critics argue this signals continued reliance on a production-led model, rather than a decisive shift toward household-driven growth.
At the same time, external pressures are mounting. Several countries have signaled plans to curb imports from China. France has warned of possible tariffs over what it sees as unsustainable trade imbalances, while Mexico has approved tariff hikes of up to 50% on Chinese imports next year to protect domestic industry.
Analysts caution that if export demand weakens further, Chinese producers may struggle to find alternative sources of growth at home.
Zichun Huang, China economist at Capital Economics, said the November data point to widespread weakness in domestic activity, partly due to reduced fiscal spending. While policy support may deliver a partial recovery in coming months, he warned that it is unlikely to prevent overall growth from remaining subdued through 2026.
