What You Should Know About China’s Latest Economic Data by Reuters @FortuneMagazine November 14, 2016, 4:24 AM EST E-mail Tweet Facebook Linkedin Share icons China‘s economy largely showed further signs of steadying in October as expected, but disappointing retail sales growth and fears of U.S. trade frictions under incoming President Donald Trump are increasingly clouding the outlook. Fixed-asset investment quickened slightly and beat expectations in January-October as the government stepped up infrastructure spending to support growth, official data showed on Monday. But a number of other indicators released over the past week from exports to bank lending, as well as expectations of a slowdown in the heated property market, suggest economic momentum may falter in the months ahead. “On balance, today’s data suggest that the recent recovery in economic activity continued into the fourth quarter,” Capital Economics said in a note. “We expect growth to hold up well for another quarter or two. However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year.” China‘s leaders have depended on a surging real estate market and government infrastructure spending to drive activity this year and look set to meet their growth target of 6.5 to 7%. The construction boom in turn has helped perk up the ailing industrial sector, spurring demand for cement to steel. For more on global markets, watch Fortune’s video: But top policymakers and investors are also clearly growing more concerned about the risks of prolonged debt-fueled stimulus. China‘s overall debt has jumped to more than 250% of GDP from 150% at the end of 2006, the kind of surge that in other countries has resulted in a financial bust or sharp economic slowdown, analysts say. “I believe the overall policy tone has turned to risk management as the authorities are concerned about asset bubbles,” said Singapore-based economist Zhou Hao at Commerzbank, predicting that the government will throttle back its aggressive stimulus before the end of the year. INVESTMENT STILL HEAVILY RELIANT ON GOVERNMENT Fixed-asset investment expanded 8.3% in the first 10 months from a year earlier, slightly ahead of market expectations and supported largely by government spending. Investment by state firms surged 20.5%, though the pace cooled slightly from the first nine months. In an encouraging sign, growth of private investment picked up to 2.9% from 2.5% in January-September, though it remained sluggish after hitting a record low of 2.1% in the first eight months of the year. Private investment accounts for about 60% of overall investment in China. Chinese policymakers have been trying to lure private investors into big infrastructure projects through public-private partnerships, but many lucrative sectors are still dominated by less efficient state firms. UNCERTAINTIES The most surprising miss for October was found in retail sales, though analysts were quick to note it was too early to tell if slowing consumption would turn into a trend. Retail sales growth cooled to a five-month low of 10.0% from 10.7% in September. Analysts had forecast they would hold steady. On Friday, Alibaba Group Holding Ltd’s Singles’ Day festival posted a record 120.7 billion yuan ($17.73 billion) worth of sales, though the gala shopping day saw growth slow as Chinese shoppers searched for deeper discounts and lower price tags. Statistics bureau spokesman Mao Shengyong blamed the sales slowdown on a high level of comparison with last year. “Consumption can maintain stable growth. There should not be a problem achieving this year’s GDP growth targets,” he told a news briefing. October industrial output also missed expectations but to a much smaller degree, rising 6.1%, the same pace as in September but marginally less than forecast. Stronger factory prices have helped boost industrial profits, relieving some pressure on companies squeezed by higher costs and weak demand, though there are concerns some of the gains are due to speculation and are not sustainable. Data last week showed a sharp slowdown in bank lending last month, suggesting demand for mortgages is cooling after a spate of steps by local governments last month to restrict home purchases to cool soaring prices. While property investment growth quickened in October to its highest since April 2014, some analysts suggested it could be due to a last-minute push by developers to complete construction projects as home sales and surging prices start to slow. October exports and imports also fell more than expected, adding to doubts that the pick-up in economic activity in the world’s largest trading nation can be sustained even if a trade war with the U.S. does not materialize. Trump had lambasted China throughout the campaign, drumming up headlines with his pledges to slap 45% tariffs on imported Chinese goods and label the country a currency manipulator his first day in office. China‘s top leaders are due to map out economic and reform plans for 2017 at the annual Central Economic Work Conference expected in December. Analysts believe it’s too early for the government to start withdrawing policy support now due to rising domestic and global uncertainties, despite the risk of added debt.