China’s sluggish consumer spending is putting a strain on its economy, with the looming threat of tariffs from Trump adding to the pressure.

In November, China’s industrial output showed a slight acceleration, while retail sales disappointed, fueling calls for Beijing to introduce more consumer-focused stimulus as it prepares for the possibility of additional US tariffs under a second Trump administration.

This mixed economic data highlights the difficulty China faces in achieving a sustainable recovery heading into 2025, particularly as trade relations with its largest export market may deteriorate and domestic consumption remains weak.

President-elect Donald Trump’s promise to impose tariffs of over 60% on Chinese goods could prompt Beijing to hasten its efforts to shift its $19 trillion economy, analysts suggest. This shift has been under consideration for over two decades, aiming to transition from a growth model reliant on fixed-asset investment and exports to one driven by consumption. China’s industrial output in November rose by 5.4% year-over-year, surpassing the 5.3% growth recorded in October, according to data from the National Bureau of Statistics, and outpacing the 5.3% forecast in a Reuters poll.

In contrast, retail sales, a key indicator of consumption, grew by only 3.0% in November, marking the slowest increase in three months, down from 4.8% in October. Analysts had expected a 4.6% growth.

Dan Wang, an independent economist in Shanghai, noted, “China’s economic policies have consistently favored manufacturers over consumers despite clear signs of persistent weakness.” He warned that this could lead to strengthened production capacity, exacerbating the overcapacity issue and encouraging Chinese companies to expand into overseas markets. Fixed asset investment also rose more slowly, by 3.3%, during the first 11 months of the year, compared to an expected 3.4% increase, down from 3.4% growth in January-October.

Xu Tianchen, senior economist at the Economist Intelligence Unit, suggested that concerns over the weak retail sales may be overstated, attributing it to the early start of the “Double 11” shopping festival, which boosted October sales. He added, “When we smooth the October-November data, growth averages around 3.9%, higher than previous months.” However, he cautioned that consumer demand remains weak and still heavily dependent on government subsidies, which contributed 1.5-2 percentage points to monthly retail sales.

China’s blue-chip index dropped by 0.37%, while Hong Kong’s Hang Seng Index fell by 0.57%.

Additional easing expected.

Policymakers have started discussing their plans for 2025, fully aware that Trump’s potential return to the White House could exacerbate the challenges facing an already struggling economy.

Over the weekend, a central bank official in China mentioned that there is room to reduce reserve requirements for banks further, but recent credit data indicated that previous easing measures had minimal impact on boosting borrowing.

This is partly due to the ongoing property crisis, which continues to dampen consumer confidence, with approximately 70% of household savings tied up in real estate.

While there were some positive signs in China’s new home prices, which declined at the slowest rate in 17 months in November, analysts caution that it’s too early to declare a recovery.

Stabilizing the property sector, which once accounted for 25% of the economy, will be crucial for Beijing to meet its growth target of around 5% for the coming year, a goal recommended by policy advisers, according to Reuters.

A recent Reuters poll forecasted 4.5% growth for China next year, with the potential for new U.S. tariffs to reduce growth by up to one percentage point.

On Monday, Moody’s raised its GDP growth forecast for China in 2025 to 4.2% from 4%.

At last week’s Central Economic Work Conference (CEWC), China’s leadership pledged to increase the budget deficit, issue more debt, and prioritize boosting consumption.

These commitments mirrored those made earlier by the Politburo, which endorsed a more lenient monetary policy, marking the first shift in stance in 14 years.

Julian Evans-Pritchard, head of China economics at Capital Economics, noted, “We believe the slowdown in November is likely to be temporary, with growth expected to rebound in the coming months as policy support intensifies.”

However, he also expressed doubt that the stimulus would lead to more than a brief improvement, particularly since the current strength of export demand may not last if President Trump follows through on his tariff threats.