BEIJING (AP) – China’s economic growth fell in the last quarter as a construction slowdown and official restrictions on energy use by factories weighed on the country’s recovery from the coronavirus pandemic.
The world’s second-largest economy grew 4.9% more than a year ago in the three months ending September, down from 7.9% in the previous quarter, government data showed on Monday. Manufacturing output, retail sales, and investment in construction and other fixed assets all weakened.
Growth is under pressure from government controls aimed at making the energy-hungry economy more efficient and reducing reliance on debt which Chinese leaders say is dangerously high and could cause financial problems. Manufacturing has been hampered by shortages of processor chips and other components due to the pandemic.
Compared to the previous quarter, depending on how other major economies are measured, production in the July-September period barely increased, increasing only 0.2%. This was down from 1.2% in the April-June period and one of the weakest quarters of the past decade.
“Growth will slow down further,” Louis Kuijs of Oxford Economics said in a report. He said “ugly growth figures” in the coming months should prompt Beijing to relax loan controls and try to support activity by encouraging infrastructure development.
Construction, an industry that supports millions of jobs, has slowed since regulators tightened control over developer borrowing last year.
One of the biggest, Evergrande Group, is struggling to avoid defaulting on billions of dollars owed to bondholders. This has fueled fears about other developers, although economists say the threat to global financial markets is low.
The manufacturing sector has been depressed by power cuts imposed by some large provinces to avoid exceeding official efficiency targets.
Factory output barely increased in September, increasing only 0.05% from August. This is down from the 7.3% growth recorded in the first nine months of the year.
Private sector forecasters have slashed their growth prospects this year for China, even though they still expect around 8%, which would be among the strongest in the world. The ruling Communist Party’s official target is “over 6%,” which leaves Beijing free to keep its controls in place.
“The short-term outlook for the Chinese economy in the fourth quarter remains difficult, due to the expected impact of persistent electricity shortages leading up to the winter season and a continued slowdown in the real estate sector,” said Rajiv Biswas of ‘IHS Market in a report. “The real estate sector continues to be affected by uncertainties linked to Evergrande’s debt problems and fears of contagion to certain other real estate developers. “
This year’s economic figures have been overstated due to the comparison to 2020, when factories and stores were closed to fight the coronavirus.
The economy grew at a record 18.3% in the first quarter of 2021, but forecasters said the rebound was already stabilizing.
In September, growth in retail spending weakened to 4.4% year-on-year from 16.4% in the first nine months.
Investment in real estate, factories, housing and other fixed assets rose 0.17% in September, from 7.3% in the first nine months.
Auto sales in the world’s largest industry market fell 16.5% in September from a year earlier, according to the China Association of Automobile Manufacturers. The group said production was disrupted by processor chip shortages.
Imports, an indicator of China’s domestic demand, rose 17.6% in September from a year earlier, but it was barely half of the 33% growth in the previous month.
National Bureau of Statistics (in Chinese): www.stats.gov.cn