Growing Domestic Demand Dependence in China... October Industrial Production Expected to Slow Down

Attention is focused on China's economic indicators, including industrial production and retail sales, which will be announced on the 15th. The market expects retail sales to improve due to domestic demand recovery and base effects, despite the continued sluggish trend in industrial production. Due to the impact of the global economic downturn, China's economic growth rate is increasingly reliant on domestic demand.

On the 12th, China’s Caijing Daily reported that a survey of domestic economists forecasted October industrial production to increase by 4.46% year-on-year. This figure, similar to external forecasts (4.3%), is expected to decline compared to the previous month (4.5%).

Earlier, the leading indicator, the Manufacturing Purchasing Managers' Index (PMI) for October, fell below 50 again (49.5) after a month, returning to a contraction phase. Jiang Liqun, a researcher at the State Council Development Research Center, diagnosed, "It was affected by seasonal factors," adding, "Overall, due to insufficient demand, oversupply occurred, causing declines in price and production indices."

On the other hand, domestic demand is expected to continue its rebound trend numerically. In the Caijing survey, participating economists predicted that October retail sales would increase by 6.62% year-on-year, improving from the previous month (5.5%). However, this is somewhat more conservative than external forecasts (7.0%).

Wu Ge, chief economist at Changjiang Securities, said, "Due to last year's base effect, the year-on-year consumption growth rate will generally rebound," but considering real estate, government bond issuance, and market travel demand, he expected monthly (October) figures to show a decline. A research report from CITIC Securities forecasted that October consumption would increase by about 7.9% year-on-year, boosted by the Guanggunjie (Double 11) effect, China’s largest shopping festival. Additionally, tourism consumption increased in October due to the Mid-Autumn Festival and National Day Golden Week holidays.

However, Caijing emphasized the need to point out that "domestic effective demand still remains at a bottom level," highlighting that the October consumer price index (CPI) inflation rate returned to negative (-0.2%).

Fixed asset investment, also announced on the same day, is expected to increase by 3.14% in October, similar to the previous month (3.1%).

Recently released Chinese trade data show a similar trend. According to the General Administration of Customs, October exports (in dollars) amounted to $274.83 billion (approximately 359 trillion KRW), down 6.4% year-on-year. Meanwhile, imports increased by 3.0% year-on-year to $218.33 billion, supported by domestic demand recovery.