China’s Growth Momentum Falters in November Amid Weak Domestic Demand and Global Trade Tensions

Summary:

China's industrial output and retail sales slowed in November 2025, exposing cracks in domestic demand and signaling deeper structural challenges. ...

Factory and Retail Growth Lose Steam Despite Stimulus Signals

China’s latest economic data reveals a marked loss of momentum. Industrial output in November rose just 4.8% year-on-year slightly below the 5.0% forecast and down from 4.9% in October indicating stagnation in the country's manufacturing sector. Retail sales, a critical gauge of domestic demand, grew only 1.3%, down sharply from October’s 2.9% and well below the expected 2.8% rise.

The figures, released by the National Bureau of Statistics (NBS), reinforce a broader narrative of weakened consumer confidence, even during peak shopping periods like the Singles’ Day festival, which was extended to five weeks this year but still failed to deliver the expected retail uplift.

Investment and Auto Sales Underscore a Fragile Domestic Economy

Fixed asset investment often a proxy for long-term economic confidence contracted by 1.3% in the first eleven months of 2025, marking a slight improvement over the previous period’s 1.7% decline but still indicating subdued business sentiment. Particularly concerning was an 8.5% drop in car sales, the largest in 10 months, suggesting that big-ticket consumer spending is still being deferred or suppressed by economic uncertainty.

Much of the drag can be attributed to the lingering property sector crisis, which has significantly eroded household wealth and stifled confidence. Reuters forecasts predict continued property price declines through 2026, only stabilizing in 2027 dimming hopes for a quick rebound in consumer-driven sectors.

Policy Promises vs. Structural Reality: Beijing’s Balancing Act

At the recent Central Economic Work Conference, Chinese leaders acknowledged the growing disconnect between strong supply-side output and persistently weak domestic demand. In response, the government pledged to maintain a “proactive” fiscal stance, with increased investment and targeted measures to boost consumption. However, observers remain skeptical that China is ready to fully pivot from its traditional export- and infrastructure-led model to one centered on household spending.

This hesitation is rooted in both ideological preference and economic inertia. While policymakers aim to maintain the 5% annual growth target into 2026 as part of the next five-year plan, international institutions like the World Bank and IMF have offered more cautious forecasts, citing structural headwinds and geopolitical risks.

Global Trade Backlash: Surplus Fuels Diplomatic Friction

China’s hefty trade surplus which continues to exceed a trillion U.S. dollars has become a growing source of friction with key trading partners. French President Emmanuel Macron recently warned of tariffs on Chinese goods, criticizing the country's "unsustainable" trade imbalances. Meanwhile, Mexico has approved sweeping tariff hikes of up to 50% on Chinese and other Asian imports starting next year, aiming to shield its domestic industry.

While exports have been one of the few bright spots in China’s economic data this year buoyed by supply chain resilience and high-tech manufacturing Beijing is now facing a more hostile trade environment that could erode this advantage. U.S. tariffs remain high, and the threat of retaliatory measures from Europe and Latin America could squeeze export margins in 2026.

The November figures act as a warning sign that China's traditional growth drivers factory production and investment are no longer sufficient on their own. With domestic consumption faltering and global backlash intensifying, Beijing must either accelerate its long-promised economic rebalancing or risk entering a prolonged period of low-confidence stagnation. The road ahead will test not only China’s policy agility but also its willingness to redefine the foundations of its economic engine.

Source: Reuters

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