China’s Mixed Economic Recovery in November 2022



Key Takeaways

  • China’s industrial output in November 2022 sees fastest growth since February 2022, but retail sales miss expectations.
  • Mixed economic data reflects a fragile recovery amid ongoing challenges in domestic demand and real estate sector.

Industrial Growth Outpaces Retail Sales

China’s recent economic data for November 2022 presents a contrasting picture of the country’s recovery trajectory. Industrial output in November exceeded expectations, marking the fastest expansion since February 2022. This growth, at 6.6% year-on-year, surpassed the projected 5.6%, reflecting a rebound in industrial activities. However, the growth in retail sales, a key indicator of consumer demand, fell short of forecasts, rising only by 10.1% against an anticipated 12.5%.

Assessing the Economic Landscape

Despite the uptick in industrial output, economists express caution, attributing the growth partly to a low base effect from the stringent zero-Covid policies in late 2022. Miao Ouyang from Bank of America notes that the overall data still points to weak domestic demand, necessitating further government intervention to stabilize the economy. Meanwhile, fixed asset investment and urban unemployment rates have shown modest changes, indicating a steady but slow recovery path.

Market Response to Economic Indicators

Following the release of the mixed economic data, Hong Kong’s Hang Seng Index responded positively, with a surge of over 3%. However, the index has still experienced significant losses year-to-date. Similarly, the CSI 300 index, representing large-cap stocks in mainland China, showed moderate gains, highlighting cautious investor sentiment amidst China’s uneven economic performance.

Future Economic Priorities

China’s leadership, recognizing the need for more robust economic measures, has outlined priorities for 2024 focused on bolstering domestic demand. This comes in the wake of consumer price declines and prolonged producer price deflation, along with disappointing import figures. The mixed economic results of November 2022 underscore the need for targeted policies to address the underlying weaknesses in China’s economy, particularly in the consumer and real estate sectors.

Real Estate Sector and Policy Focus

The fragility of China’s economic recovery is further emphasized by ongoing challenges in the real estate sector, which remains mired in a deep crisis. Investments in infrastructure and manufacturing have seen growth, but the real estate development investment continues to decline. Additionally, home prices have been falling for five consecutive months, reflecting persistent issues in the sector despite Beijing’s attempts to deleverage and stabilize the market.


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