New DelhiChina’s economy slowed again in October, with factory output and retail sales both growing at their weakest pace in a year, The world’s second largest economy is already struggling with sluggish domestic demand, trade war with America and continuously falling investment, in such a situation these new figures seem to increase China’s problems further, For many decades, China had two easy ways to increase its growth, either increase exports on a large scale on the basis of factories, or start huge infrastructure projects with government money, But now both ways are not working,
US President Donald Trump’s tariff war has given a clear signal to China that it can no longer depend only on the world’s largest consumer market. On the other hand, it is becoming difficult to achieve growth even by building new industrial parks and power substations because the total capacity of the country is now at its limit. This is the reason why the figures coming every month seem to be worsening instead of improving.
Disappointment in factory output and retail sales
According to the National Bureau of Statistics, China’s industrial production increased by only 4.9 percent in October, which is much less than 6.5 percent in September. This is the weakest figure after August 2024. Retail sales also increased by only 2.9 percent whereas the expectation was 2.8 percent. The figures may be formally above the target, but this pace is not able to hide the weakness of domestic demand. China’s famous ‘Singles Day’ shopping festival also did not increase sales as expected this time. Prices were low but buyer confidence remained weak, which shows that consumers’ wallets are not as strong as before.
Growth hit by trade war and weak exports
The biggest danger for China is that its export machinery is no longer able to perform as before. Exports suddenly collapsed in October as demand there collapsed due to a slowdown in the US market and high tariffs. Producers had increased stocks for months, but now they are finding it difficult to make profits elsewhere. The car market also got affected by this. China’s auto sales suddenly fell after eight months of growth, despite expectations that purchases would increase before the tax breaks end. This decline is a big cause for concern for policymakers because the last quarter of the year is usually the strongest time for car sales.
Investment and property sector is slipping and fear is increasing
Fixed asset investment declined by 1.7 percent between January and October, which was weaker than expected. Already, lack of confidence and decline in private investment was suppressing China’s growth, now this figure makes the situation more serious. The biggest problem is the property sector, where the prices of new houses fell at the fastest pace in a year. In China, houses are not just a place to live, but also the savings of families. The fall in prices means that crores of families are feeling insecure about their future.
Policy dilemma facing China
The Communist Party of China has recently held a meeting and decided the economic direction for the next five years, in which it has been said to increase domestic consumption and strengthen the industrial base. But the real challenge is that implementing these reforms is extremely difficult and fraught with political risk. Many economists say that the government may again choose the same old path, in which big government enterprises and infrastructure projects get priority, while small businesses and families are left behind. Initial signs are also going in this direction.
There is little hope of a big stimulus right now
China’s growth target is 5 percent and to achieve it, only about 4.5 percent growth in the fourth quarter will be enough. For this reason, the government does not seem to be in a mood to give stimulus on a large scale. But experts say that if domestic demand, exports and investment remain weak like this, then major reforms or relief packages will have to be given before 2026.
