CHINA ECONOMY：BROAD-BASED SLOWDOWN SIGNALS INTENSIFYING HEADWINDS
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2025-11-17 13:38:47
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China’s economy showed broad-based slowdown in Oct, despite no real pressure in meeting the full-year growth target. The property market saw an accelerated price decline, while sharp sales contraction on last year’s high base raised the risk of renewed credit stress. Retail sales fell to one-year low and fixed asset investment experienced the second biggest contraction since Feb 2020, as softening fiscal expansion and the anti-involution measures weighed on infrastructure and manufacturing investment. GDP growth only needs to reach 4.5% in 4Q to meet the full-year target, but the sharp contraction in property and consumption indicates that demand remains weak and the recovery is uneven. The sluggish nominal GDP growth also points to persistent deflationary pressure, underscoring the need for continued and consistent support to consumers to sustain the price rebound. We expect the PBOC may further cut LPR by 10 bps and RRR by 50 bps before the end of 1Q26. The MoF might expand fiscal support to households and property sector. GDP growth may slow down to 4.5% in 4Q25 with full-year GDP growth down from 5% in 2025 to 4.7% in 2026.
Property sector remained in deep contraction due to higher base and diminishing stimulus effect. The contraction of gross floor area (GFA) sold for commercial building deepened to 6.8% in 10M25 from 5.5% in 9M25 according to NBS. Contraction of residential housing start expanded to 19.8% in 10M25 at 359 million m2, short of the housing sales at 603 million m2 and back to the level in 2003-04, which should support a supply-demand rebalancing in 2027-28. For new housing sales in Nov according to market data, the recovery rate of 30 major cities compared to 2018-2019 remained at bottom at 37.2% in early Nov, close to the level of Sep 25 at 37.1%. Its YoY sales posted a much steeper slump due to the larger base last year, dropping 35% with tier-1, 2 & 3 cities declining 41%, 30% and 36% respectively. Second-hand housing sales of 11 selective cities rebounded in recovery rate from 110% in Oct to 117% in early Nov, while its YoY growth dipped 25.2% due to higher base. New and second-hand housing prices saw faster decline at -0.5% and -0.7% in recent months, as effects from policy support faded and demand softened. Months of supply showed that new property inventories have accumulated rapidly across city tiers in recent months, with months to sell climbed to records high of 20.5 months in Oct. The weakening property market may further weigh on durable consumption and developers’ cash flow, prompting major policy easing in 4Q25 and 1Q26. Due to the absence of unconventional measures such as a central government-led housing purchase program or substantial mortgage interest subsidies, the contraction in the property market and the decline in housing prices could persist in 1H26.
Retail sales edged down as trade-in boost faded. Retail sales growth hit one-year low at 2.9% in Oct from 3% in Sep, above market consensus of 2.7%. Impacts of trade-in subsidies and tax credit has largely run its course, as home appliances, construction & decoration materials, and auto saw negative growth at -14.6%, -8.3% and -6.6% in Oct. Furniture moderated to 9.6% in Oct from 16.2%; while office products and telecom equipment rebounded to 13.5% and 23.2% in Oct thanks to the “double 11” online promotion. Gold, silver & jewellery notably surged to 37.6% in Oct as gold price hit its record high. Catering service jumped from 0.9% to 3.8% in Oct, thanks to the golden week holiday and the loosening of the dining restrictions on government officials. Retail sales may further slow down in the remaining of the year due to higher base and the drag from demand pull-forward. Looking forward, retail sales may moderate to 3.1% in 4Q25 from 4.5% in the first three quarters, bringing full-year growth to around 4.2%.
FAI growth notably contracted. Total FAI growth dropped to -1.7% in 10M25 from -0.5% in 9M25, notably missing market expectations at -0.7%. The YoY growth further contracted to -11.2% in Oct from -6.8% in Sep with broad-based softening. Infrastructure investment notably dipped 12.1% in Oct from -8%, marking the deepest contraction since February 2020 when COVID first emerged. Government’s anti-involution competition campaign has weighed on manufacturing investment, dropping 6.7% in Oct. Property investment further contracted by -23.1% in Oct from -21.2% in Sep, as the oversupplied housing market continued to rebalance. Looking forward, FAI growth may remain subdued in 4Q25 with full-year growth at -2.5% in 2025 compared to 3.2% in 2024. Manufacturing and infrastructure investment growth is likely to fall from 9.2% and 9.2% in 2024 to 2% and 1% in 2025.
Industrial output rebounded. VAIO growth moderated to 4.9% in Oct from 6.5%, missing market consensus of 5.5%. Mining edged down to 4.5% in Oct from 6.4%; while public utility rebounded to 5.4% from 0.6%. VAIO of manufacturing slowed down to 4.9% in Oct from 7.3% with broad-based moderation as delivery value for exports dropped to -2.1% from 3.8%. Food, textile, rubber & plastic products, non-ferrous metal and special purpose equipment saw notable moderation while medicines and non-metal mineral products saw negative growth. Growth of service output index edged down to 4.6% in Oct from 5.6% with robust growth of IT and software services. Looking forward, industrial output may decelerate due to the headwinds from exports, demand overdraft from trade-in subsidy and pressure from the antiinvolution policy.
No real pressure in meeting the full-year growth target, but both the property sector and consumption are crying out for policy support. GDP growth only needs to reach 4.5% in 4Q to meet the full-year target, but the sharp contraction in property and consumption indicates that demand remains weak and the recovery is uneven. The sluggish nominal GDP growth also points to persistent deflationary pressure, underscoring the need for continued and consistent support to consumers to sustain the price rebound. We still expect further policy easing in December or 1Q26 as the PBOC may further cut LPR by 10 bps and RRR by 50 bps, and the MoF may expand fiscal support to households and property sector. 机构：招银国际证券有限公司 研究员：Frank Liu/Bingnan YE 日期：2025-11-17
Property sector remained in deep contraction due to higher base and diminishing stimulus effect. The contraction of gross floor area (GFA) sold for commercial building deepened to 6.8% in 10M25 from 5.5% in 9M25 according to NBS. Contraction of residential housing start expanded to 19.8% in 10M25 at 359 million m2, short of the housing sales at 603 million m2 and back to the level in 2003-04, which should support a supply-demand rebalancing in 2027-28. For new housing sales in Nov according to market data, the recovery rate of 30 major cities compared to 2018-2019 remained at bottom at 37.2% in early Nov, close to the level of Sep 25 at 37.1%. Its YoY sales posted a much steeper slump due to the larger base last year, dropping 35% with tier-1, 2 & 3 cities declining 41%, 30% and 36% respectively. Second-hand housing sales of 11 selective cities rebounded in recovery rate from 110% in Oct to 117% in early Nov, while its YoY growth dipped 25.2% due to higher base. New and second-hand housing prices saw faster decline at -0.5% and -0.7% in recent months, as effects from policy support faded and demand softened. Months of supply showed that new property inventories have accumulated rapidly across city tiers in recent months, with months to sell climbed to records high of 20.5 months in Oct. The weakening property market may further weigh on durable consumption and developers’ cash flow, prompting major policy easing in 4Q25 and 1Q26. Due to the absence of unconventional measures such as a central government-led housing purchase program or substantial mortgage interest subsidies, the contraction in the property market and the decline in housing prices could persist in 1H26.
Retail sales edged down as trade-in boost faded. Retail sales growth hit one-year low at 2.9% in Oct from 3% in Sep, above market consensus of 2.7%. Impacts of trade-in subsidies and tax credit has largely run its course, as home appliances, construction & decoration materials, and auto saw negative growth at -14.6%, -8.3% and -6.6% in Oct. Furniture moderated to 9.6% in Oct from 16.2%; while office products and telecom equipment rebounded to 13.5% and 23.2% in Oct thanks to the “double 11” online promotion. Gold, silver & jewellery notably surged to 37.6% in Oct as gold price hit its record high. Catering service jumped from 0.9% to 3.8% in Oct, thanks to the golden week holiday and the loosening of the dining restrictions on government officials. Retail sales may further slow down in the remaining of the year due to higher base and the drag from demand pull-forward. Looking forward, retail sales may moderate to 3.1% in 4Q25 from 4.5% in the first three quarters, bringing full-year growth to around 4.2%.
FAI growth notably contracted. Total FAI growth dropped to -1.7% in 10M25 from -0.5% in 9M25, notably missing market expectations at -0.7%. The YoY growth further contracted to -11.2% in Oct from -6.8% in Sep with broad-based softening. Infrastructure investment notably dipped 12.1% in Oct from -8%, marking the deepest contraction since February 2020 when COVID first emerged. Government’s anti-involution competition campaign has weighed on manufacturing investment, dropping 6.7% in Oct. Property investment further contracted by -23.1% in Oct from -21.2% in Sep, as the oversupplied housing market continued to rebalance. Looking forward, FAI growth may remain subdued in 4Q25 with full-year growth at -2.5% in 2025 compared to 3.2% in 2024. Manufacturing and infrastructure investment growth is likely to fall from 9.2% and 9.2% in 2024 to 2% and 1% in 2025.
Industrial output rebounded. VAIO growth moderated to 4.9% in Oct from 6.5%, missing market consensus of 5.5%. Mining edged down to 4.5% in Oct from 6.4%; while public utility rebounded to 5.4% from 0.6%. VAIO of manufacturing slowed down to 4.9% in Oct from 7.3% with broad-based moderation as delivery value for exports dropped to -2.1% from 3.8%. Food, textile, rubber & plastic products, non-ferrous metal and special purpose equipment saw notable moderation while medicines and non-metal mineral products saw negative growth. Growth of service output index edged down to 4.6% in Oct from 5.6% with robust growth of IT and software services. Looking forward, industrial output may decelerate due to the headwinds from exports, demand overdraft from trade-in subsidy and pressure from the antiinvolution policy.
No real pressure in meeting the full-year growth target, but both the property sector and consumption are crying out for policy support. GDP growth only needs to reach 4.5% in 4Q to meet the full-year target, but the sharp contraction in property and consumption indicates that demand remains weak and the recovery is uneven. The sluggish nominal GDP growth also points to persistent deflationary pressure, underscoring the need for continued and consistent support to consumers to sustain the price rebound. We still expect further policy easing in December or 1Q26 as the PBOC may further cut LPR by 10 bps and RRR by 50 bps, and the MoF may expand fiscal support to households and property sector. 机构：招银国际证券有限公司 研究员：Frank Liu/Bingnan YE 日期：2025-11-17
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