Slowing, not spiraling | The weekly recap

The National Bureau of Statistics (NBS) released its three headline monthly datasets this week – industrial value-added (IVA), fixed asset investment (FAI), and retail sales – and all came in weaker than expected.

• FAI fell a whopping 12.0%.
• IVA growth slowed to 4.8% y/y, the weakest pace in 15 months.
• Retail sales eked out just 1.3% growth, the slowest in three years.

There’s no question the economy is cooling.

• But unlike the prevailing media narrative, we don’t think this data, overall, points to a cyclical downturn – or calls for an aggressive policy pivot from Beijing.

Put simply: November was bad, but, as we pointed out to subscribers earlier this week, the economy is far from cracking.

Start with industrial output. Despite the headline slowdown, November’s IVA print actually wasn’t as dire as you might think.

• By historical standards, 4.8% growth is still respectable, and high-tech manufacturing – including aerospace, electronics, and advanced equipment – actually accelerated, rising 8.4% y/y, up from 7.2% in October.
• On a month-on-month basis, IVA grew 0.44%, equivalent to an annualized pace of around 5.4% – hardly the profile of an economy in free fall.

Meanwhile, the slump in FAI looks to have been largely policy-driven.

• As we flagged last month, weaker manufacturing investment reflects Beijing’s push to rein in “involution-style” competition and excess capacity.
• At the same time, infrastructure spending is pulling back as local governments divert funds toward paying down hidden debt, prioritizing balance-sheet repair over headline growth.

The adjustment is painful in the short term – but Beijing appears willing to tolerate it in service of longer-term sustainability.

And what about that ugly retail sales figure?

• Here, the weakness mainly reflects the fading boost from the consumer goods trade-in program, which has faced funding constraints since Q3.
• As a result, sales of big-ticket items – autos, home appliances, furniture – are sliding sharply.

Still, it’s not all doom and gloom on the consumption front.

• Retail sales of goods outside the trade-in scheme – such as textiles, cosmetics, and office supplies – continue to post decent growth.
• Even more encouraging, services consumption rose around 6.2% y/y in November – the fastest pace this year.

Consumers haven’t stopped spending – they’re shifting from goods to services. That’s a dynamic businesses and investors shouldn’t ignore.

Exports, meanwhile, remain a crucial pressure valve for manufacturers – and a key growth engine.

• Exports rose 5.9% y/y in November, driven mainly by high-value-added products.
• China’s year-to-date trade surplus has now topped USD 1 trillion – the largest ever recorded.

Stepping back, November’s data reinforces a familiar theme heading into year-end: the economy is cooling, but unevenly.

• With exports holding up, services consumption accelerating, and industrial output still expanding at a reasonable clip, we expect China to hit its full-year growth target and maintain moderate growth into 2026.
• The bigger question isn't whether Beijing gets there – but what mix of growth it's willing to accept, and how much short-term pain policymakers are prepared to absorb to push longer-term rebalancing.

In the coming months, we will be watching three signals closely:

• Will infrastructure investment stabilize as local government balance-sheet pressures ease?
• Can services consumption continue to offset weak growth in durable goods?
• Will policymakers pivot from supply-side adjustment toward more direct household support?

The answers to those questions will shape not only the 2026 outlook, but also the longer-term trajectory of China’s growth model.

Joe Peissel, senior macroeconomic analyst, Trivium China

What you missed

Econ and finance

A series of commentaries from senior policymakers have shed further light on policy priorities coming out of the recently concluded Central Economic Work Conference (CEWC).

The three big takeaways:

• Officials from the Central Commission for Financial and Economic Affairs (CCFEA) – the Party’s top economic policymaking body – confirming increased government investment in eldercare, childcare, and healthcare.
• To curb unsustainable practices – such as unauthorized tax breaks, land and energy price concessions, and debt-funded subsidies – CCFEA officials said the central government will publish a list of rules governing such practices.
• The editorial board of Qiushi – the Party’s flagship journal – called for accelerating reforms to shift the consumption tax collection point downstream and gradually allocate revenues to local governments.

On December 13, the National Healthcare Security Administration (NHSA) – responsible for overseeing the country’s public healthcare – pledged to “basically achieve” nationwide zero out-of-pocket payments for “in-scope” childbirth costs by 2026.

• “In-scope” expenses include delivery costs at the general wards of public hospitals, as well as drugs and medical consumables listed in the national reimbursement catalogue.

• Currently, seven provinces, including Jilin, Jiangsu, and Shandong, have already achieved full coverage of in-scope inpatient delivery expenses.
• The NHSA announcement follows calls from the recently concluded Central Economic Work Conference to “stabilize the scale of the newborn population.”

Business environment

Beijing is set to expand market access in strategic sectors and ease rules for foreign investors.

• That’s according to the Central Commission for Financial and Economic Affairs (CCFEA) – China’s top economic policymaking body – in an explainer published Tuesday.
• Regulators plan to open key sectors to more foreign participation, including expanding pilots in biotechnology and value-added telecoms.
• Foreign firms will also face fewer hurdles in establishing R&D centers in China.

Tech

On December 12, Bloomberg reported that Chinese officials are considering a range of financial support measures for the semiconductor industry totaling RMB 200-500 billion (approximately USD 70 billion).

• At the upper end, this would be the largest state-backed semiconductor funding program ever – well above the USD 39 billion in subsidies set aside under the US CHIPS Act.
• The initiative would reportedly operate independently of existing state funding schemes, such as the Big Fund – China’s biggest semiconductor fund.

On Wednesday, Reuters reported that a secret Chinese project to develop EUV lithography – tech mastered by Dutch firm ASML that’s key to advanced chipmaking – has produced a prototype extreme-ultraviolet light source.

• Reliably generating EUV light is a difficult first step in achieving EUV lithography, and the breakthrough suggests China may be further along in replicating ASML’s technology than previously thought.
• Sources told Reuters that it relied crucially on two elements: cobbling together salvaged and second-hand ASML components and recruiting former ASML engineers.
• The project closely involves Huawei, with sources claiming that founder Ren Zhengfei personally briefs “senior Chinese leaders” on progress.

Agriculture and rural affairs

On Tuesday, China’s commerce ministry (MofCom) released a final ruling in its EU pork anti-dumping investigation, which has dragged on for the past 18 months.

• The headline: Beijing significantly reduced tariffs relative to the preliminary findings released in September.

• The lowest rate – applied to pork from Spanish meat processor Litera Meat SL – was reduced from over 15% to under 5% in the final tariff schedule.
• The highest rate – applied to a handful of companies that participated in the investigation, as well as all non-participant exporters – was dropped from over 60% to 19.8%.

Foreign affairs

On Wednesday, top diplomat Wang Yi spoke with Venezuelan Foreign Minister Yván Gil Pinto to discuss “threats and aggression against Venezuela, and risks looming over Latin America and the Caribbean.”

• US pressure on Venezuela has spiked in recent weeks, culminating in US President Donald Trump ordering the seizure of sanctioned oil tankers and threatening a maritime blockade on the country.
• Beijing has real skin in the game: China buys the lion’s share of Venezuelan crude, much of it routed via independent “teapot” refiners to sidestep sanctions.
• Wang stuck to vague language, stating, “the international community understands and supports Venezuela’s position.”

On December 11, Mexico’s senate approved a package of tariffs of between 5% and 50% on Asian imports – which will hit a range of Chinese imports, including autos, steel, and clothing.

• The move comes amid pressure from the US to adopt a coordinated tariff strategy to counter China ahead of next year’s review of the US-Mexico-Canada Agreement.
• Mexican President Claudia Sheinbaum has pre-emptively tried to smooth things over with Beijing, emphasizing that “The measures aren’t aimed at China—that’s very important—they are aimed at countries with which we don’t have a trade agreement.”

US-China

China’s handling of the US is spot on – so said Xi Jinping at the Central Economic Work Conference, which concluded on December 11.

• According to Xi, China’s handling of the trade war has “demonstrated the resolve, backbone, and confidence of the Chinese people, showcased our hard power, and earned the respect of the international community.”
• Xi argued that US attempts to constrain China’s technological capabilities has failed: “Facts have proven that efforts to ‘strangle’ us at the chokepoints cannot succeed.”

As always, it was a busy week in China.

• Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.