中国：年末表现弱于预期

Weaker end to the year thanexpected The sharper slowdown in retail sales and investmentreflected faded fiscal stimulus, worsened property woes, LG'slack of funding and manufacturing overcapacity. Theslowdown in IP was much milder thanks to green-tech and AIcomponents. The CEWC suggests stimulus will be measuredand reactive. Yingke Zhou+852 2903 2653yingke.zhou@barclays.comBarclays Bank, Hong Kong Ying Zhang+852 2903 2652ying.zhang3@barclays.comBarclays Bank, Hong Kong Jian Chang+852 2903 2654jian.chang@barclays.comBarclays Bank, Hong Kong Following a broad-based slowdown in July-October, we note that almost all the domesticdemand indicators pointed to a further sharp deterioration in November, with a visibleslowdown and big miss in retail sales growth and deeper contraction in fixed asset investment.We think the rapid slowdown in domestic demand reflects a combination of factors,including: 1) payback from earlier front-loaded fiscal stimulus; 2) worsened property woes thatweigh on sentiment via negative wealtheffectsand spillover to the upstream and downstreamsectors; 3) local governments' lack of funding, which drags on infrastructure investment; and 4)lingering overcapacity issues and weak profit margins that hold back manufacturinginvestment. We highlight some key developments in the November data. •Retail sales growth slowed for the sixth consecutive month, slowing visibly to 1.9% inNovember from 2.9% y/y in October, even falling below the level seen in Q3 24 of ~3% beforeChina kickedoffthe trade-in subsidy program. The slowdown was again led by trade-inrelated retail sales, with an outright contraction in household appliances (Nov: -19.9%, Oct:-14.6%). Moreover, auto sales (~10% of retail sales) contracted 8.3% y/y in November (Oct:-6.6%), reflecting the payback from strong demand in H1, in our view. Our discussions withmarket participants suggest that local governments are curbing incentives for the trade-inprogramme as funds are depleted more rapidly than expected. Moreover, our channel checkssuggest that some major auto companies are quite downbeat on 2026 domestic auto salesvolume, and expect low-single-digit growth in 2026, down from ~11% YTD. •FAI, on a single-month basis, posted afifthconsecutive month of outright contraction, falling11.1% y/y in November (Oct: -10.9%), the lowest since the pandemic. In particular, thecontraction in infrastructure widened from 11.5% in October to 13.2% y/y in November,hitting a five-year low. We think the rapid deterioration reflects local governments' lack offunding given the payback from the earlier front-loaded LGSB issuance and slumping landsales revenue. For context, land sales revenue is on course to fall to only ~CNY4trn in 2025from the peak of CNY8.7trn in 2021 and ~CNY4.8trn in 2024. Moreover, manufacturinginvestment remained in contraction for thefifthconsecutive month, posting a decline of 4.3%in November. Reduced manufacturing investment, along with contracting propertyinvestment/sales, also help to explain the persistent miss in (long-term) bank loans. •Property investment fell 30.3% y/y in November, a record drop (Oct: -23%), and propertysales remained deep in contraction, declining 17.3% y/y, still below the level before the policypivot in September 2024. The decline in exiting home prices has lasted for almost three years,with a 0.7% m/m drop in November, compared with the average fall of 0.5% over the pastyear and the drop of 0.7% in October. In our view, this will further dampen homebuyersentiment. Even with mortgage rates hitting a record low of 3.06%, household long-termloans (mostly mortgages) continued to drop on a y/y basis in November, pointing to weakhousing demand. Moreover, new starts, a leading indicator for investment, posted a 28% y/ycontraction, only a little better than the 29.5% decline in October. We expect propertyinvestment to post another 10% contraction in 2026 in view of sharp drop in developers' landpurchases and new starts. Moreover, we think the CEWC's statement on propertydisappointed the market, given: 1) its ranking in the policy agenda was lowered to eighth(last) fromfifthin 2024; and 2) the removal of language calling for stop falling and stabilize(止跌回稳). •Despite sharp and broad-based slowdown in demand indicators, industrial production (IP),the supply indicator, remained broadly stable at 4.8% y/y in November, versus 4.9% inOctober, thought it was visibly lower than 5.8% in Q3. We think the slower but still solid IPgrowth was supported by a visible rebound in exports in November, thanks to strong exportsin green-tech and AI manufactured components. Given China's GDP growth is still productionbased, we think the moderation in Q4 GDP growth may not be as rapid as the demandindicators suggest. However, with supply indicators still exceeding demand indicators, wethink China's deflation pressure could persist and its export-led growth model continue,which could lead to rising trade and investment tensions bet