Over the last few weeks, top leaders have revealed additional aid for the economy, particularly for embattled local governments. This prompted the International Monetary Fund to update its growth projection for China to 5.4% for 2021, and 4.6% for 2024.
On Wednesday, China reported better-than-expected retail sales and industrial production figures for October. Retail sales grew 7.6% year-on-year, exceeding the 7% forecast from a Reuters poll. Meanwhile, industrial production rose 4.6% from the year before, beating expectations of a 4.4% increase. Fixed asset investment for the first 10 months of the year, however, was slightly lower than expected, growing by 2.9% instead of the 3.1% increase predicted. Real estate also continued to be a drag, as investment fell by 9.3%, a steeper decline than the 9.1% reported in the first nine months of the year. The urban unemployment rate held steady at 5%, according to the National Bureau of Statistics, without any reported unemployment rate for young people since the summer.
In October, a 25.7% year-on-year increase was observed in the sales of sporting and leisure entertainment items in the retail sector. Further, catering, alcohol and tobacco all recorded double-digit increases. The auto sector had an 11.4% year-on-year surge in sales. Golden Week, the key national holiday in China, took place in the initial week of October. Official reports indicated that domestic tourism expenditure almost reached the 2019 values, but such figures were likely impacted by a lack of overseas trips in comparison with pre-COVID amounts.
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In the recent weeks, key decision makers have declared more aid to the economy, largely targeting struggling provincial governments. In addition, Beijing has taken measures to stabilize the colossal real estate industry, which is expected to comprise of a smaller fraction of the economy as time goes by. The International Monetary Fund raised its outlook of China's growth this year to 5.4% last week, owing to the policies Beijing has declared. The IMF's view of 2024's growth was also elevated to 4.6%. Gita Gopinath, the IMF's First Deputy Managing Director, stated to CNBC in a private interview that "the pressure is still there" when talking about the real estate market.
She noted there is still tension in the market, and pointed out that weakness will not be resolved rapidly. "It's going to take longer to revert to a more healthy status," she said. UBS analysts calculated that the real estate and correlated industries have accounted for around 25% of China's total GDP. This year, however, they have calculated that share to have dropped to 22%. Fewer new home sales have been reported, and big-name property developers such as Country Garden have found themselves failing to meet their debt obligations.
China's consumer price index (CPI) experienced a decline of 0.2% last month, but the core CPI that disregards food and energy prices had a 0.6% annual growth according to the official data. This was followed by an unexpected rise of imports from a year ago in U.S. dollar terms, while exports dropped by 6.4%, exceeding the forecasts. This is the most recent news, stay tuned for further developments.
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