China’s GDP is growing at the slowest pace in a year as massive energy crunch, shipping disruptions and a deepening property crisis take their toll on the world’s second largest economy.
The economy expanded by 4.9% in the third quarter, compared with the same period a year earlier. That’s much slower than the 7.9% increase China registered in the second quarter. It’s also the weakest rate of growth since last year’s July-to-September period, when GDP also grew 4.9%.
Fu Linghui, the spokesperson for China’s National Bureau of Statistics, said at a press conference in Beijing on Monday that the challenges of keeping the economy running smoothly have increased. He said the country’s recovery from the Covid-19 pandemic is “still unstable and uneven.” He also added that on the whole, the economy continues to recover and the country has the “ability and conditions” to reach its development targets this year.
China was the only major economy to escape 2020 without falling into recession. But it has encountered a slew of challenges this year that are weighing heavily on growth.
The country is in the middle of an energy crunch that is denting factory output and leading to power cuts in some areas. This problem has been fuelled by demand earlier in the year for construction projects that need fossil fuel and are at odds with Beijing’s pursuit of ambitious targets to cut carbon emissions.
Shipping delays and mounting inventories have also hit smaller manufacturers in China that are now hurting for cash, resulting in lost orders and production cuts.
The real estate sector is also suffering from a government drive to curb excessive borrowing. Property investment is now falling. That is placing a strain on developers, not least Evergrande, whose debt crisis has triggered worries about the risk of contagion effect for the sector and the broader economy. Some other property firms have already indicated that they are struggling to pay their debts.
Industrial production ticked up a mere 3.1% last month from a year ago, the lowest rate since March 2020, when the pandemic was slamming China’s economy.
Meanwhile, Real Estate-related activities and Fixed-asset investment appears to have declined in September, reversing a slight gain in August, according to estimates from Goldman Sachs.The Goldman analysts noted that while control measures cut into retail sales growth in August, those restrictions were soon relaxed, leading to a rebound.The analysts disclosed further that they expect consumer spending to continue recovering in the fourth quarter, barring “major waves” of Covid-19 outbreaks.
Despite the slowing growth this quarter, China is still on track to meet an annual 6% growth target set by Beijing. For the first three quarters of 2021, GDP grew 9.8% compared to the previous year, when the Covid-19 pandemic was taking its toll.
However, many analysts are still concerned. Several firms have cut their growth forecasts for China this year. And the country will likely need to take more steps to shore up growth in the coming months.
According to Kuijs from Oxford Economics, it’s likely China will relax some aspects of “overall credit and real estate policies,” for example, and policymakers will likely encourage more infrastructure projects.
Culled from CNN