China's economy stalls as calls grow for reform

China’s factory output growth slowed to a 15-month low, while retail sales posted their worst performance since the country abruptly ended its draconian “zero-Covid” curbs, highlighting the urgent need for new growth drivers heading into 2026.

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Employees at a factory in Ganzhou, China. Industrial output rose 4.8 per cent year-on-year, National Bureau of Statistics data showed on Monday, the weakest pace since August 2024.

(REUTERS)

With Beijing’s consumer trade-in subsidies fading, a drawn-out property crisis weighing on household spending and industrial investment risking further deflation, officials have leaned on exports to support growth.

That strategy now looks increasingly unsustainable as trading partners around the world bristle at China’s $1 trillion trade surplus and look to erect import barriers.

Industrial output rose 4.8 per cent year-on-year, National Bureau of Statistics (NBS) data showed on Monday, the weakest pace since August 2024, slowing from 4.9 per cent in October. It missed a 5.0 per cent increase forecast in a poll.

Retail sales, a gauge of consumption, grew 1.3 per cent, their weakest pace since December 2022, when the world’s second-largest economy ended pandemic restrictions, well below 2.9 per cent in October and forecasts for a 2.8 per cent gain.

"Strong exports limited the need to turbocharge domestic demand this year, and the trade-in subsidies have started to run out," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

"I think policymakers have turned their attention to 2026, since the around 5 per cent growth target seems within reach for this year, so there’s little additional motivation for further stimulus."