Chinese factory output is still running high.
AFP via Getty Images
Chinese factory production rose faster than expected in November but disappointing retail sales, slow investment growth, and the property market slump illustrated the challenges facing policy makers seeking ways to support growth.
Manufacturing output rose by 3.8% last month from a year earlier, facilitated by strong coal and crude oil production. The data were notably boosted by strong production of electronic goods and pharmaceuticals.
But retail sales only grew by a yearly 3.9% in November, way below analysts expectations of 4.6%—and a 4.9% rise in October.
The country’s zero-tolerance policy on Covid-19, with strick lockdowns or other restrictions in parts of the country, accounts for most of the disappointing performance of the domestic economy last month.
And the government’s and regulators’ crackdown on the property sector’s leverage has hit demand hard, leading to a 20% annual drop of steel and cement production last month.
The government has pledged to support growth with further fiscal measures, even though the economy should still expand by about 8% this year, above the 6% official target.
The economy’s Covid challenge seemed to worsen on news that China’s vaccine, known as Sinovac, provides a weak protection against the Omicron coronavirus variant. None of the 25 subjects in a Hong Kong study show sufficient antibodies.
“Omicron could be a real challenge for China if they maintain their zero Covid approach (…) It still might be a mild variant but it’s seems so virulent that any containment strategy will be economically tough,” wrote
Deutsche Bank
analysts.
Write to Pierre Briançon at [email protected]
