China | Economic activities have continued sliding

Summary

October economic activity indicators showed continuing sliding. All of these activity indicators are below the previous month’s readings and the market consensus amid the weak market sentiments.

Key points

• Key points:
• Fixed asset investment (FAI) and retail sales further declined to historical low since Covid-19 pandemic.
• These weak economic activity figures in the past several months suggest that after the external shock from China-US trade war almost settled after China-US four rounds negotiations and Xi-Trump Busan meeting, domestic risks have surged to become the prime factor that lead to growth slowdown.
• Chief among these domestic risks remains the housing market crash, in which we have not observed any bottomed-out signals yet. Other risks include overcapacity, deflation and weak market sentiments etc.
• As 1H GDP already reached 5.3% and Q3 GDP achieved 4.8%, it is easy to get the authorities’ 5% growth target if Q4 GDP grew above 4.5%. We raise our 2025 GDP forecast from 4.8% previously to 5%, in line with the target, and maintain the 2026 GDP forecast at 4.5%.
• The15th Five-Year Plan (2026-2030) has been approved recently, which sketches the blueprint of the economic and social development of the next five years aiming for achieving “socialist modernization” in 2035.

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