China’s economy lost steam in October as weak consumer spending and a deepening real estate slump weighed on growth, even as the long holiday paused factory output. The soft patch has renewed concern over jobs, local debt, and the pace of recovery in the world’s second-largest economy.
China’s slowdown worsened in October, dragged by soft consumer demand and a deepening property downturn, with the long holiday period further denting factory activity.
The setback comes after a bumpy year marked by uneven retail sales and repeated stress in housing. October’s National Day holiday, often a boost for travel and dining, appeared to offer only partial relief. Many plants shut for several days, trimming production and export shipments.
Why demand is still weak
Households remain cautious. Savings are high and spending is selective. Consumers are trading down on big-ticket goods while favoring discounts on daily items. This caution follows years of property-driven wealth effects that have now faded.
Price data in recent months signaled soft demand, with periods of falling factory-gate prices and low consumer inflation. Retail sales improved at times in 2024 but failed to build a steady trend. Service spending held up better than goods, yet not enough to offset housing losses.
The property drag grows heavier
Housing is at the heart of the slowdown. Developers face tight funding and sluggish sales. Construction starts and land purchases by builders have fallen for an extended period, hurting local finances and related industries from steel to home appliances.
Authorities have eased mortgage rules and guided banks to support “reasonable” home purchases. Some cities relaxed down-payment requirements and price caps. These steps helped clear some inventory, but buyers remain wary of unfinished projects and price declines.
Analysts warn that a slow clean-up of bad developer debts keeps uncertainty high. Without stronger balance sheets and clearer delivery guarantees, confidence may remain fragile.
Factories feel the holiday pause—and deeper headwinds
The October holiday reduced operating days for many manufacturers. That temporary pause coincided with softer global demand and margin pressure from past price cuts. Some firms are shifting to higher-value exports and niche parts to defend profits.
- Shorter production schedules during the holiday lowered output.
- Weak overseas orders limited a quick rebound.
- Inventory control stayed tight to protect cash.
Equipment makers report cautious capital spending plans from clients. Smaller suppliers face delayed payments, especially those tied to construction and local projects.
Policy moves and what might come next
Beijing has rolled out steps to support credit, housing delivery, and local investment. Central authorities encouraged special bond issuance for infrastructure and measures to backstop key developers’ projects. Targeted tax relief supported small firms in services and manufacturing.
Economists say more precise aid could help. Proposals include faster resolution of distressed developers, stronger protection of homebuyers’ deposits, and direct support for household spending. Many also push for funding to settle local government financing vehicle debts and reform land-sale reliant budgets.
Jobs, sentiment, and the broader risk
Employment is a pressure point. Youth joblessness surged earlier in the cycle and remains a concern. Services hiring improved in tourism and catering, but manufacturing recruitment is uneven. Wage growth is modest, adding to the cautious mood among shoppers.
Business leaders watch confidence as closely as output. A clearer path to finishing pre-sold homes and a timetable for dealing with weak developers could lift expectations. Stable prices and steady credit would also reduce the urge to save more and spend less.
What to watch in the months ahead
Key signals will come from housing sales, new construction starts, and retail sales around year-end promotions. Any rebound in export orders could help factories fill capacity lost in October. Financial data on credit growth and local bond issuance will show whether policy is gaining traction.
China still has tools to stabilize growth. The test is speed and precision. Faster delivery of homes, tighter risk control, and focused support for families could steady demand while the property sector resets.
For now, October’s setback is a reminder that the recovery remains fragile. The next phase will hinge on restoring confidence—one finished apartment, one steady paycheck, and one cautious purchase at a time.
