China’s industrial output and retail sales recorded their slowest growth in more than a year this October, underscoring the increasing pressure on Beijing to overhaul an economy valued at $19 trillion. As policy options to spur growth narrow, both supply- and demand-side challenges have raised concerns over China’s trajectory.
Data released by the National Bureau of Statistics on Friday showed that industrial production was up just 4.9% year-on-year last month—the weakest pace since August 2024, missing market expectations of a 5.5% rise and slipping sharply from the 6.5% growth posted in September.
Retail sales, widely watched as a sign of domestic consumption strength, grew 2.9% in October, slightly retreating from September’s 3.0% and matching the slowest clip since August 2024.
For decades, officials managing the world’s second-largest economy have relied on surging exports or sprawling infrastructure investments to drive growth, especially during periods of tepid local demand. However, President Donald Trump’s ongoing trade war has exposed China’s heavy dependence on U.S. consumption, making export-led and infrastructure-centric strategies less effective in the current climate.
Economic indicators published Friday suggest that any rebound could be slow, intensifying calls for substantial reform. Growth from exports frontloading in the recent quarter will be difficult to sustain in the coming year, even if the U.S. levy is lower than anticipated, said Fred Neumann, HSBC’s chief Asia economist. Without more aggressive domestic stimulus, Neumann warned, it will be challenging to offset the recent slowdowns in both investment and consumption.
Fixed asset investment also disappointed, falling 1.7% in the first 10 months of the year compared to the same period last year. This was below forecasts and a steeper decline than the 0.5% contraction seen during January to September.
Policymakers have acknowledged the need for reforms aimed at correcting historic supply-demand imbalances, boosting household consumption, and confronting mounting local government debt burdens. Nevertheless, they have also recognized that the restructuring process carries significant political risks, particularly as U.S. trade pressures intensify.
Exports unexpectedly weakened in October, according to separate data released last week. Producers have found it increasingly difficult to find profitable outlets beyond the U.S. following months of efforts to outpace Trump’s tariff hikes.
In addition, China’s automobile market stumbled, ending an eight-month streak of sales growth despite widely held expectations that buyers would rush to capitalize on soon-to-expire tax breaks and subsidies. The disappointing performance came in a quarter that is traditionally the strongest period for car sales, adding to the sector’s woes.
Meanwhile, the property market—an essential pillar of household wealth in China—remains in a protracted slump, with new home prices slipping at the fastest monthly rate in one year.
Following a recent Communist Party summit to set out the country’s next five-year plan, officials vowed to substantially increase the role of household consumption in GDP, while also emphasizing the need to bolster the industrial sector. This has sparked speculation among economists that Beijing could once again favor state-led infrastructure projects—quick fixes that would channel resources to large firms and keep headline growth near the official target of approximately 5%.
