China’s economic momentum is showing troubling signs of deceleration, as November data reveal widespread weakness across key growth indicators. Retail sales growth slumped to just 1.3 percent year-on-year, marking the sixth consecutive month of declining momentum. Investment figures paint an equally concerning picture, with fixed-asset investment falling deeper into negative territory. These developments underscore mounting challenges facing Beijing’s economic recovery efforts.
Retail sales disappoint as consumer confidence remains fragile
The 1.3 percent growth in retail sales in November fell short of the forecast target of 2.92 percent, marking a significant decline from the 2.9 percent growth in the previous month. This is the sixth consecutive month that has shown a gradual slowdown in growth momentum, indicating that consumer spending in China remains weak despite government measures to boost the economy.
Industrial output also faced some stresses, as it grew only 4.8 percent in November, compared to the 4.9 percent increase in October. The manufacturing purchasing managers’ index continued to stay in contractionary territory at 49.2 for the eighth consecutive month, remaining below the important level of 50, which separates contraction from expansion. The manufacturing sector in China is facing challenges due to low demand both in and out of China.
Urban unemployment is sustained despite economic challenges
The unemployment rate for urban areas remained at 5.1 percent in November, continuing from the previous month with the same unemployment level. The unchanged employment rate gives some reprieve to the overall economy, even as economists point to potential increases in job market pressures if the economy remains weak in 2026.
Investment figures expose underlying structural problems in the economy
Fixed asset investment decelerated further, falling 2.6 percent in the first eleven months of 2025, compared to a decline of 1.7 percent in January and October. This result fell well short of Wind’s forecast of a 2.17 percent decline, and suggests that the pace of investment weakness is picking up rather than stabilizing. Private sector investment weakened even further, with a decline of 5.3 percent, compared to a 4.5 percent decline from January to October.
According to a report by Goldman Sachs, it was found that about 60 percent of the year-on-year decrease in fixed asset investment in October was due to the statistical revision of over-reported data. As a result, driven by “anti-innovation” policies introduced by the government and the ongoing property downturn, the data has shown volatility.
- Real estate investment fell by 15.9% year-over-year.
- New home sales based on floor area were down 7.8%
- The Manufacturing PMI declined for the eighth consecutive month
Policy response is inadequate to counter the declining growth trend
In fact, Gary Ng, senior Asia Pacific economist at Natixis, stated that “the scale of the government policies introduced so far has not been large enough to turn around the growth trend.” Although China is expected to reach its approximately 5 percent real growth target for the year, subdued sentiment is likely to put even more pressure in 2026. The central economic work conference concluded with comments on the need to strengthen domestic markets and maintain fiscal deficits.
Ding Shuang, Standard Chartered, expects GDP growth of about 4.4 percent in the fourth quarter, with annual growth of 4.9 percent. Nevertheless, he pointed out that the Chinese government seems to pursue a policy promoting sustainable and self-driven growth instead of relying on expansionary policies. The diminished effectiveness of consumer trade-in schemes and the reluctance to increase spending on this front indicate that policy support in the coming year is unlikely to add to the current level.
This is because the economic challenges facing the Chinese economy are deeply rooted in structural problems that demand a comprehensive approach to policy formulation beyond the conventional stimulation measures. The fact that there is a challenge in consumption, investment, and manufacturing means Beijing has to address confidence problems while dealing with external uncertainties.
