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China’s Economic Activity Slowed in November

China’s economic activity decreased in November, owing to a prolonged property slump and slow consumption recovery, according to The Wall Street Journal (subscription).

What’s happening: “Leading indicators of consumption and investment activity weakened further from October, while factory production rose at a faster pace in November as a power crunch eased, according to China’s National Bureau of Statistics on Wednesday.”

  • However, one bright spot for the economy was industrial production, which grew 3.8% last month from a year ago.

Property prices down: The cost of new apartments, which began falling in September, continued to decrease, and new home prices dropped 0.33% last month across 70 cities, the largest month-over-month dip in approximately six years.

  • New construction starts dropped 9.1% in the period from January to November.

Why it’s happening: “The latest economic data point to a further slowdown in China’s economy that began to sputter in the third quarter on the back of a power crunch that curbed factory output, and sporadic COVID-19 outbreaks that hit consumption.”

The response: Policymakers in China have signaled that they will move to shore up the economy. And “[l]ast week China moved to unleash more liquidity in the financial system by cutting the reserve requirement ratio, or the amount of cash that banks must hold in reserve. Some economists expect China could further reduce the reserve requirement ratio and even lower key benchmark interest rates in coming months.”

The COVID-19 component: Following the detection of more than 200 COVID-19 cases in the Zhejiang province in the past 10 days, at least 20 manufacturers there halted production.

  • “Recent COVID-19 outbreaks suggest that consumer caution will remain, and further supply-chain disruptions are a ‘significant possibility,’ economists from Capital Economics wrote in a note Wednesday.”
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