Chinese economy slows in November as housing crisis worsens

BEIJING: The Chinese economy slowed further in November, driven by the deepening housing market collapse and disruption caused by repeated outbreaks of Covid.
Growth in capital investment slowed to 5.2% in the first eleven months of the year. Real estate investment rose 6% in the same period, compared to 7.2% in the January-October period, as financing rules remained tight and home sales plunged.
Industrial production rose 3.8% from the previous year, after 3.5% in October and above the 3.7% forecast by economists. Retail sales growth weakened to 3.9%, missing economists’ forecasts of a 4.7% gain. Sales in the food and beverage industry fell 2.7% as people stayed home amid new outbreaks of the virus.
The data highlights the downward pressure on the economy from the real estate sector and the scale of the challenge the Chinese government faces in stabilizing the world’s second-largest economy. While Beijing is expected to make more credit available and has signaled some easing of controls on the housing market to support “stability,” officials last week maintained the basic position that “houses are made to live in,” not for speculation ”.
The slowing economy has prompted Beijing to focus on stabilizing growth, with the central bank easing monetary policy and the Communist Party ordering more budget spending in 2022.
Earlier Wednesday, the central bank kept the interest rate on one-year loans to banks unchanged and renewed only about half of maturing debt, drawing liquidity from the economy. However, a recently announced reduction in the reserve requirement ratio for banks will take effect on Wednesday, which will increase the amount of money financial institutions have on hand to lend.
“The international environment is increasingly complex and gloomy and there are still many constraints on national economic recovery,” the National Bureau of Statistics said in a statement. We need to “combine cross-cyclical and counter-cyclical macroeconomic policy adjustments in order to stabilize the overall macroeconomy.”
Investment in infrastructure, another weak link in China’s slow recovery this year, grew at a slower pace of 0.5%. Local governments have stepped up efforts to borrow money and start new projects, and Beijing has allowed authorities to start selling next year’s bonds from Jan. 1 to speed up spending.
Consumption weakened despite the continued strong sales support around the “Singles Day” shopping festival, which failed to offset the impact of the Covid-19 epidemics on the consumption of services, sales in restaurant and catering, and purchases in physical stores.
The polled unemployment rate climbed to 5% as the average number of hours worked per week fell to 47.8 from an all-time high of 48.6 in October. The unemployment rate for 16-24 year olds increased slightly from 14.2% to 14.3%.
“Domestic consumption remains weak with disappointing retail sales,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “The gradual increase in the unemployment rate is worrying. The authorities should promise more support and give a stronger signal to the market.”

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