China’s economy needs more help

Chinese policymakers suddenly sent More strong signals on supporting growth. The final big data release of 2021, announced Wednesday, shows why.

November economic data shows Consumers face difficulties, industry tends to move sideways and the real estate sector is still in deep trouble – albeit with expected signs of bottoming out sales and some heavy industrial activity. China’s economy is still in serious trouble and needs more policy support, both fiscal and monetary, to stave off an even stronger recession next year. The growth numbers coming in spring will at least be given a softer tone than the weak early part of the year.

As for the November data, the good news is mostly bullish. Industrial output rose for a second straight month to 3.8% year-on-year growth from 3.5% in October. In October, however, strength was concentrated in the mining sector. mining and electricity, continued steady recovery after dilution of curbs with regard to safety and the environment leading to widespread power outages in early autumn. Manufacturing growth accelerated to 2.9% year-on-year from 2.5% in November, but still far below the late summer level of around 6%. On the other hand, mining growth reached 6.2% – the highest level since the end of 2019. Growth in electricity, heat and water supply was 11.1%.

The news for consumers is even worse. After a modest recovery to 4.9% growth in October, retail sales growth fell back to 3.9% last month – possibly reflecting the impact of a limited coronavirus outbreak. and the harsh response of the government.

The picture for housing, still the real key to turning the economy around and fending off financial risks, has been mixed. On the other hand, prices in many mid-sized cities have fallen. And year-on-year growth in heavy industry output, floor space sold and new construction starts are all deeply negative. On the other hand, floor space sales increased slightly compared to the previous month. And while residential investment fell again year-over-year, the rate of decline has eased for the first time this year. Rebar futures prices have also recovered a bit in Shanghai over the past few weeks. Some of the recent policy measures to support housing-related lending could start to have an impact on margins.

Overall, Wednesday’s data release still paints a worrisome picture as the year ends. Policymakers still have to cut their jobs to make sure things don’t get worse in 2022.

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