Gabriel Crossley, Kevin Yao

BEIJING (Reuters – China’s factories grew faster in November than predicted, supported by a higher energy output and a lower price for raw materials. But, sales slow down as COVID-19 new outbreaks affected the country’s second-largest.

This data along with slowing investment growth highlighted the persistent headwinds that face the second-largest country on earth, prompting policymakers and advocates to increase their support.

“The economy remained quite weak in November,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“Domestic consumption has declined further due to the continuing slowdown in property and the policy of zero tolerance that affects the service sector.”

Official data on Wednesday showed that factory output increased by 3.8% over a year ago in November, exceeding expectations and moving faster than the 3.6% increase expected in October.

Although retail sales increased 3.9% in November compared with a year before, it was below the predicted 4.6% increase and October’s 4.9% growth.

Fixed asset investments increased 5.2% over the previous year, slower than the 5.4% rise predicted by a Reuters poll.

China’s economy is struggling after the solid recovery from pandemic. It faces many challenges going into 2022 due to property decline and COVID-19 restrictions that have impacted consumer spending.

Analysts expect the fourth quarter gross domestic product to slow below 4.9%, whereas the full year growth may still exceed the target of over 6.6%.

China’s leaders set a crucial agenda for the meeting, promising to work together in order to stabilize China’s economy and keep growth within an acceptable range by 2022.

Top leaders signalled a sense of urgency by vowing to frontload stimulus next year in advance of the 20th Communist Party Congress. This Congress will see key leadership changes.

The People’s Bank of China has reduced the cash reserves that banks have to support the country’s flagging economy. This is its second move of the year. The rates of its relending facility, which supports the small and rural sectors, were also reduced.

China’s factory gate inflation, which was raging in China for years, has been somewhat tempered by both a government clampdown and an improvement in the power supply.