China's factory output and retail sales grew at their weakest pace in over a year in October, piling pressure on policymakers to revamp the $19 trillion export-driven economy as a trade war with the US and weak domestic demand heighten risks to growth.
For decades, the officials charged with keeping the world’s second-largest economy humming have had the option of spurring its vast industrial complex to boost exports should consumers tighten spending at home, or reaching into the public purse to fund GDP-boosting infrastructure projects.
But US President Donald Trump’s tariff war is providing a stark reminder of the manufacturing juggernaut’s reliance on the world’s largest consumer market, and even an economy of China’s size can only squeeze so much growth from building more industrial parks, power substations and dams.
Yesterday’s indicators gave little hope for a quick turnaround, and the worse the data gets every month, the more urgent the need for reform becomes.
“China’s economy is facing pressures from all sides,” said Fred Neumann, chief Asia economist at HSBC.
“The strong lift from exports that supported growth in recent quarters will be hard to sustain into next year, even if US import tariffs now turned out lower than feared. That leaves domestic demand to pick up the slack, but without significant further stimulus, it will be hard to reverse recent slowing in both investment and consumption,” he added.
Industrial output grew 4.9 per cent year-on-year in October, National Bureau of Statistics (NBS) data showed, the weakest annual pace since August 2024, compared with a 6.5pc rise in September. It missed a 5.5pc increase forecast in a Reuters poll.
Retail sales, a gauge of consumption, expanded 2.9pc last month, also their worst pace since August last year, and cooled from a 3.0pc rise in September. They compared with a forecast gain of 2.8pc.
Policymakers acknowledge the need for change to address historical supply-demand imbalances, lift household consumption and tackle towering local government debt that keeps provinces – many with economies the size of nations – from being self-reliant.
All the same, they also recognise structural reform will be painful, and is fraught with political risk at a time when Trump’s trade war has ramped up pressure on the economy.
“The external environment remains fraught with instability and uncertainty, while domestic structural adjustments face considerable pressure,” Fu Linghui, a spokesperson at the NBS told a press conference following the data release.
China’s exports unexpectedly crumbled in October, data showed last week, as producers struggle to turn a profit in other markets after months of front-loading to beat Trump’s tariff threats.
&uuid=(email))