Domestic demand weakens – Standard Chartered

November IP growth remained solid at 4.8% y/y thanks to an export-growth rebound after the trade deal. Real estate and infrastructure FAI declined deeper; policy makers vowed to stabilise investment. Retail sales of goods softened as policy effect faded, but services sales picked up, Standard Chartered’s economists Hunter Chan and Shuang Ding report.

Increased sense of urgency to stabilise demand

“November real activity data suggests that (strong) supply / (weak) demand imbalances persisted in China. Industrial production (IP) m/m growth accelerated in November thanks to a rebound in export growth, while both retail sales and fixed asset investment (FAI) declined m/m, with the latter falling for 10 straight months. This imbalance was highlighted as a key domestic challenge at the 2025 Central Economic Work Conference (CEWC).”

“The rebound in export growth (5.9% y/y) supported production activity. IP growth moderated 0.1ppt to 4.8% y/y with the 2Y CAGR staying at 5.1% y/y on our estimate. Meanwhile, services production index growth edged down 0.6ppt to 4.2% y/y, likely dragged down by real estate, residence services and tourism. Investment and retail sales turned weaker. FAI contracted deeper by 2.6% y/y in 11M-2025, mainly dragged down by real estate (-15.9% y/y) and infrastructure (-1.1% y/y) investment. Retail sales growth slumped to the slowest rate after 2022 at 1.3% y/y, partly due to the fading boost from the consumer-goods trade-in programme and normalising sales of gold and other jewellery. That said, services retail sales growth accelerated.”

“Weaker-than-expected October-November data indicates softer q/q growth momentum from Q3. We forecast Q4 and 2025 annual growth at 4.4% y/y and 4.9%, respectively. The CEWC vowed to stabilise investment by expanding central budgetary spending. The government will also continue to issue ultra-long-term central special bonds to subsidise consumption in 2026.”