Transcription
Now, to China, which is showing more signs of trouble for the economy. Last month, Beijing had a truce with Donald Trump. This was after months of a heated trade war. And that deal, that truce, raised hopes of a recovery.
But the slowdown in China has not eased. And the proof lies in China's shops and supermarkets. Consumer spending is still sluggish. It's been slow for more than four years now, and that makes it China's longest slowdown in household consumption. A full four years of weak demand. In simple terms, Chinese consumers are still holding back. They're not buying enough. This trend began right after the pandemic and it still continues.
Beijing is expected to release new data this week. Early reports suggest another weak number. Retail sales in the month of October rose by just 2.8%. What does that mean? It means that retail sales were not very high. They track how much consumers spend. This includes everything that households buy, from your groceries to gadgets. And a rise in this number, in the retail sales number, usually signals strong demand. But in China, retail sales rose by just 2.8% last month. This is the weakest growth in over a year and the fifth straight month of slowdown. In September, the growth figure was 3%. That was already a 10-month low. So spending is not just slowing, it is stuck. Chinese households are not opening their wallets. And that's a problem that Beijing has not been able to fix.
Also, it's not for lack of trying. Throughout 2025, throughout this year, China has rolled out cash incentives. They have extended subsidies to households. And the plan did work for a while, but it hasn't been enough to spur demand because the deeper problem here is that of confidence. People are saving more and spending less, perhaps because they're worried about the long term. So that's the first challenge.
The second challenge is trade. And on this front, China faces a different kind of slowdown. Last month, Chinese President Xi Jinping met US President Donald Trump. It was their first meeting in six years. And in this meeting, they agreed to a ceasefire, a one-year truce in their trade war. As part of this, they lifted restrictions on rare earths, they eased tariffs, and China agreed to buy more soybean from the US.
This truce is holding for now, but the damage has already been done, a lot of it. Many Chinese firms lost orders in key markets in the United States. Take the case of one aluminum products maker. His company saw a 20% drop in revenue. Why did that happen? Because first, they lost consumers and customers in America. And second, they couldn't ramp up sales in other global markets. We're talking about markets in Latin America, Africa, Southeast Asia, West Asia. Orders from these other places could not make up for the fall of orders from the United States.
And this could trigger a new risk for China. If domestic consumption remains weak, Chinese firms will turn to exports for recovery. And remember, they already produce more than what they can consume in China. So now, if Chinese demand remains weak, they will want to sell more elsewhere. That means Chinese products could flood overseas markets, and that could lead to more trade tensions for China, especially with those countries who want to cut back on Chinese products, who want to buy less from China.
In fact, China tried to address this challenge earlier this year. It expanded a trade-in program for households. And the idea here was quite simple. Replace your old fridge, phone, or microwave, and the Chinese state will give you a cash rebate. Some families even got money to upgrade smart toilets. The scheme was wildly popular. Some provinces ran out of money early. The central government had to step in with more funds, and sales of household items did surge, which was good news. But such schemes may not help in the long term because how often would you replace your fridge? And that means fewer customers next year, fewer sales, and a higher risk of a renewed slump.
This is where China's slowdown runs deeper. It points to a structural problem. For years, China prioritized its factories. It poured investment into manufacturing, but it did far less to support household demand. And the result is this strong supply and weak spending. For any recovery, demand needs to grow. But Beijing has relied on short-term fixes. It is focused on factory output, not raising incomes or creating stable jobs. And now the cracks are starting to show.
So, what does it look like for 2026? How is the Chinese economy poised for the next year? It looks uncertain. Retail sales could fall below pre-subsidy levels. Export markets remain shaky. The property crisis has not eased, and Chinese citizens are less confident to spend. So, China may be the factory of the world, but right now, it is struggling to sell to its own people.
Want the facts? >> The latest developments? >> News that gets straight to the point? >> Well, we've got all three just for you. This is First Post Live, a brand new show, your window into what really matters. >> Don't miss it.