ZHU YANRAN

15 Dec 2021

(Yicai Global) Dec. 15 — China expects to achieve its main targets and tasks for economic and social development this year, according to the National Bureau of Statistics.

That is because the fundamentals of the country’s long-term and sound economic growth have not changed, despite the triple pressures of lower demand, supply shocks and weakened expectations, NBS spokesman Fu Linghui told reporters in Beijing today.

From the demand side, growth in retail sales of consumer goods fell back into single digits from double-digit growth at the beginning of the year, he said, adding that although it has improved in the past two months, it is still at a low level.

Year-on-year gains in investment have also fallen below the double digits seen early in the year, reflecting a contraction in demand, Fu said.

Retail sales of consumer goods rose 3.9 percent to CNY4.1 trillion (USD644 billion) from a year ago, down from 4.9 percent a month earlier, according to NBS data released today. For January to November, the figure was CNY40 trillion (USD6.3 trillion), up 13.7 percent from the same period of 2020.

High Base Year Ago

Last month’s drop in consumption growth was related to the high base last year, Zheng Houcheng, director of Yingda Securities’ research institute, told Yicai Global. Retail sales of consumer goods rose 5 percent in November 2020 from the previous year, 0.7 percentage point more than the prior month.

The trend in the scale of consumption and its structural upgrade will not change, Fu said, adding that many favorable conditions for a consumption recovery still exist. Firstly, employment is stable, corporate profits are rising fast, and higher incomes are guaranteed, Fu said.

Secondly, the market has effectively maintained stable supply and prices, and consumer prices have risen moderately, with expectations for overall consumption stable, he said. Moreover, the gradual economic recovery and continuous improvement in social security are also help underpin consumer confidence, Fu added.

From January to November, China’s fixed asset investment was CNY49.41 trillion (USD7.76 billion), an increase of 5.2 percent year-on-year but a decline of 0.9 percentage point on the first 10 months. Spending on infrastructure rose 0.5 percent over the first 11 months, down 0.5 point from the first 10 months. And investment in property development was CNY13.73 trillion, up 6 percent year on year. The growth was 1.2 points below the figure from January to October, according to NBS data.

The swift decline in the growth of infrastructure investment should be attributed to the upgrading of real estate regulation, larger implicit government debt pressure and standardized operations of public-private partnership projects, according to Luo Zhiheng, vice director of Yuekai Securities’ research institute.

Factory Gate Prices

Continuous gains in factory gate prices reflect the impact of supply shocks, as international commodity prices have risen, domestic energy and metal supply is tight, and chip shortages have significantly affected some industries, he told Yicai Global.

The manufacturing purchasing managers index has fallen since April, Luo noted, adding that the service sector’s business activity index has been fluctuating greatly due to the impact of the pandemic, but has shown a downward trend as a whole. These all reflect weakened expectations.

Last month, however, the added value of industrial firms above a designated size rose 3.8 percent on the year, up 0.3 point from October. Over the first 11 months, the figure rose 10.1 percent on the year, today’s NBS data showed.

Editors: Xu Wei, Peter Thomas