China stimulus effect cools as calls for helicpoter drops grow louder

China's retail sector hit a speed bump in November, with sales growth cooling to a tepid 3% year-over-year, the slowest pace in three months and a stark drop from October's 4.8% surge. This underperformance, disclosed by the National Bureau of Statistics, fell well below the buoyant 5% growth anticipated by economists. In a contrasting uptick, industrial output modestly outperformed expectations, ticking up to 5.4%, reflecting a slight but steady industrial resilience likely due to export front loading.

This dip in retail vigour, particularly after last month's robust sales fueled by governmental boosts in home appliances and cars, signals wavering consumer confidence as the stimulus effect fades quicker than an ice cube in the desert.

Market reactions were swift and sombre: the CSI 300 Index of major mainland stocks retreated slightly, while the benchmark 10-year yield dipped to an all-time low of 1.74%, signalling investor trepidation. Meanwhile, the yuan was surprisingly undisturbed in both onshore and offshore trades.

Amidst these domestic shifts, the spectre of renewed trade tensions with the U.S. following Trump's re-election threatens to overshadow exports—a critical pillar of China's economic expansion this year.

In response, top Chinese policymakers last week amplified their commitment to invigorate consumer spending, pledging to "forcefully lift consumption" to stimulate domestic demand across the board. Yet, despite these vocal commitments, the actual roadmap remains murky, with Beijing continuing to shy away from more radical fiscal stimuli such as direct cash injections into consumer pockets—often dubbed as "helicopter money."

As China grapples with these economic crosscurrents, the global investment community remains on edge, watching closely for Beijing's next economic move amid global uncertainty and internal demands for a more robust consumer-driven growth strategy.

Despite mounting pressures and the undeniable need for vigorous economic revival measures, Chinese policymakers continue to play their cards close to the chest, leaving investors speculating about the extent and details of the proposed stimulus.

Instead, China has tiptoed around substantial fiscal stimulus since 2021, opting for gradual monetary easing. But even with the People's Bank of China signalling a more generous monetary policy last September, the reality on the ground resembles pushing on a string: “You can lead a horse to water, but you can't make him drink.”

Stripping away the facade, the real economy's access to credit was notably frail last month, marking the weakest November lending since the financial crisis, excluding loans to financial institutions. This stark data highlights a troubling disconnect between policy intentions and tangible economic engagement among the populace.