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China is facing the risk of rising unemployment from a sharp slowdown in the economy due to falling demand from Europe. Industrial output growth fell to its slowest pace in more than two years in November, and inflation also fell. Economists predict it will lead Chinese authorities to set a new macro-economic policy to support growth.
A series of weak data has given the strongest signal yet of sharply slowing economic growth in China.
Economists predict Beijing will adjust its economic policy to be more pro-growth, as exporters feel the impact of declining demand from Europe and the United States.
China's annual consumer inflation rate fell to 4.2 percent in November—the lowest in more than a year.
Industrial output growth dropped to 12.4 percent—its slowest growth in more than two years.
Producer price inflation fell to just 2.7 percent, half the previous month, after data released last week showing factory activity contracted.
But retail sales increased sharply, which few economists expected.
Some economists are predicting full year growth in 2012 with a fall below 9 percent for the first time in a decade.
An analyst from Hwabao Trust in Shanghai, Nie Wen, told Reuters the sharp contraction in the economy, external uncertainties and easing of inflationary pressure suggests China's macro economic policy would shift growth to supporting growth.
Many expect bank reserve requirements to be cut as soon as this year, with interest rate cuts to follow in the first half of next year.
But authorities will have a difficult time preventing a damaging contraction in the economy that could have dire social consequences and put millions of migrant factory workers out of work.
Ben Yang