China in Search of Economic Upswing: A Special Kind of Challenge

China's retail sales remained below expectations in November, increasing pressure on policymakers to create new impetus for the world's second-largest economy. The consumption index grew by 3 percent compared to the previous year, but fell short of the 4.6 percent forecast from a Reuters survey and the 4.8 percent increase in the previous month. Industrial production improved by 5.4 percent, slightly surpassing predictions. The unexpectedly weaker consumption data comes at a time when senior members of the Communist Party of China are calling for stronger efforts to boost consumption. These demands are reflected in the Central Economic Work Conference, which is placing more emphasis on domestic demand. Meanwhile, Beijing is struggling to restore public confidence amid a four-year downturn in the real estate sector and sporadic deflationary phases. Recently, measures have been taken to strengthen stock markets and focus on the refinancing of municipal debt. On Monday morning, Chinese stock market losses were recorded. The CSI 300 index of top mainland Chinese stocks fell by 0.6 percent by late morning, while the Hang Seng Index in Hong Kong dropped by 0.4 percent. Yields on Chinese ten-year government bonds fell by 0.05 percentage points to 1.73 percent, and the yield on 30-year bonds fell below the 2-percent mark for the first time. The focus on consumption as the number one priority in the current economic report indicates an increasing urgency on the part of the government. At the same time, the monetary policy course is shifting for the first time in over a decade towards a "moderately loose" stance. In November, consumer prices rose only 0.2 percent, a five-month low, raising concerns about the strength of domestic demand. Since the lifting of strict Covid-19 measures nearly two years ago, consumption has been recovering sluggishly. For the year 2024, Beijing is aiming for a growth target of about 5 percent, which President Xi Jinping has firmly assured. He emphasized the significance of China as the world's largest growth engine. In the real estate sector, investments in the first eleven months of the year fell by 10.4 percent compared to the same period last year, following a decline of 10.3 percent in the first ten months.