China: Retail sales slow in November, more support announced

China Macro: November retail sales disappoint, housing market data improve somewhat

This morning, activity data for November were published. The most remarkable deviation from consensus expectations was retail sales, which had shown a clear pick-up in September and October. Annual growth of retail sales slowed to 3.0% y/y in November (October: 4.8%, consensus: 5.0%). This partly reflected the timing of the Singles Day online shopping event, which was scheduled earlier this year and partly took place in October. In monthly terms, retail sales slowed to 0.2% m/m, slightly down from 0.3% in October. Meanwhile, industrial production picked up marginally to 5.4% y/y (October: 5.3%, consensus: 5.4%), and by 0.5% m/m (October: 0.4%), possibly already being supported by frontloading in the run-up to anticipated higher US import tariffs next year. Fixed investment slowed marginally to 3.3% y/y in January-November (Jan-Oct: 3.4%, consensus: 3.5%). Some slightly more positive signs came from the housing market. For the second time in a row, residential home sales were higher than the same month one year earlier – and this had not happened since May 2023. And the monthly drop in (both new and used) home prices eased for the third month in a row. Meanwhile, the unemployment rate was steady at 5.0%. All in all, the data showed that the supply side remained stronger than the demand side, and therefore more stimulus is needed going forward to support domestic demand.

Last week, Beijing once more confirmed it will step up stimulus in 2025

In September, Beijing started pivoting from longer-term industrial policy to short-termdemand management, with the PBoC cutting policy rates and bank RRRs and taking other measures to stabilise equity and real estate markets. Since then, various officials have announced the government’s readiness to step up fiscal policy support. Last week, the government’s annual Central Economic Working Conference (CEWC) held on 11-13 December formed another opportunity for Beijing to show its commitment on this front. In the run-up to the CEWC, the Politburo announced early last week that the monetary policy stance would be shifted from ‘prudent’ to ‘moderately loose’, for the first time in 15 years. This is in line with our view that more RRR cuts and policy rate cuts are forthcoming soon, with the total amount of policy rate cuts likely to be higher than in 2024 (30-35bp so far) and 2023 (20bp).

Supporting domestic demand key policy goal for 2025

Also in the CEWC statement, the key policy goal for 2025 listed was ‘to comprehensively expand domestic demand’, while the fiscal policy stance for 2025 is now described as being ‘more proactive’ rather than just ‘proactive’. Beijng also confirmed its readiness to raise the headline budget deficit (from 3% of GDP in recent years) and to step up the issuance of special ultra-long central government bonds and special local government bonds. The CEWC statement also reiterated the aim to stabilise the property sector. Beijing had already announced a RMB 12trn package to help local governments clean up their off-balance sheet debts, while a recapitalization package for large state banks is forthcoming. Another measure that was flagged (but with no concrete numbers attached yet) are the buying back by local governments of housing inventory and unused land from property developers. All these measures fit within the ‘indirect approach’ to support domestic demand chosen so far. However, the CEWC statement also hinted on more direct support for consumption that will be broader than support for just a few specific groups (the poorest, students). Reference was made to more support for middle- and low-income groups, and to an increase in pensions and health insurance benefits.

Policy statements broadly in line with our views laid out in 2025 China Outlook

All in all, the latest policy announcements are broadly in line with the views that we laid out in our 2025 China Outlook, That 2018 (tariff) feeling – What’s different in 2025?. Next to more monetary easing, we expect more fiscal stimulus to follow in 2025 under a stepwise approach. This stepwise approach enables Beijing to finetune support with actual developments in activity and sentiment, while keeping part of its powder dry for when more is known about Trump’s tariff plans and their impact.