Retail sales in China rose 7.6% year on year in October, according to the country's National Bureau of Statistics. This growth exceeded the 7% that economists had expected and was an acceleration of September growth of 5.5%. The rise in retail sales is seen as a positive sign, especially given stringent Covid restrictions that impacted spending activity last year.
However, the data also revealed a worsening real estate slump, an ongoing problem for China. Despite efforts by Beijing and local governments to lower home-buying thresholds and costs, home sales by value fell 3.7% in the first 10 months of the year compared with the same period the previous year. The decline follows a 3.2% fall in the January-September period, underscoring the growing pains in the property sector.
Economists have cautioned against viewing rising retail sales as a turning point, emphasizing the need for sustained income growth and an improving housing market to boost long-term consumption. The WSJ quoted Deng Wang, chief economist at Hang Seng Bank China, as saying the recent rise in retail sales could be explained by factors such as the country's eight-day Golden Week holiday and favorable weather, which may not support sustained growth in consumption.
The downturn in the real estate market has led to financial strain for major developers: Country Garden, once China's largest developer, defaulted on its debt in October. The situation also affected China Vanke, one of the oldest and largest real estate companies in the country, leading to a sell-off in the market.
Mixed signals came from other economic indicators: industrial production rose 4.6% from a year earlier, up slightly from September's 4.5%. Fixed investment increased 2.9% in the January-October period, a slight decline from the 3.1% growth recorded in the first three quarters of the year.
