Chinese economy stumbles over electricity crisis and real estate issues – .

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Chinese economy stumbles over electricity crisis and real estate issues – .


  • China’s third-quarter GDP grows 4.9% year-on-year vs. 5.2% forecast
  • September factory output growth weakest since March 2020
  • Real estate construction prolongs declines

BEIJING, Oct. 18 (Reuters) – China’s economy hit slowest growth rate in a year in third quarter, hit by power shortages, supply chain bottlenecks and fluctuations major developments in the real estate market and increasing pressure on policymakers to do more to support the faltering recovery.

Data released on Monday showed gross domestic product (GDP) increased 4.9% in July-September from the previous year, the lowest figure since the third quarter of 2020 and missing forecasts.

The world’s second-largest economy faces several major challenges, including the China Evergrande group debt crisis, continued supply chain delays, and a critical electricity crisis, which has seen factories plummet since September. early 2020, when heavy COVID-19 restrictions were in place. .

“The national economic recovery is still unstable and uneven,” National Bureau of Statistics (NBS) spokesman Fu Linghui said during a briefing in Beijing on Monday.

China’s economy has seen an impressive rebound from last year’s pandemic crisis thanks to effective containment of viruses and strong foreign demand for the country’s manufactured goods. But the recovery has faltered in the face of the explosive growth of 18.3% recorded in the first quarter of this year.

“In response to the dismal growth figures we expect in the coming months, we believe policymakers will take more steps to support growth, including ensuring abundant liquidity in the interbank market, accelerating infrastructure development and easing some aspects of global credit and real estate policies, ”said Louis Kuijs, head of Asian economics at Oxford Economics.

A Reuters analyst poll expected GDP to grow 5.2% in the third quarter.

The weak numbers pushed the yuan and most Asian stock markets down amid broader investor concerns about the global economic recovery. Read more

Global concerns about a possible spillover of credit risk from the Chinese real estate sector into the wider economy have also intensified as large developer China Evergrande Group (3333.HK) grapples with more than $ 300 billion in debts. Read more

Chinese leaders, fearing a lingering real estate bubble could undermine the country’s long-term rise, will likely maintain severe restrictions on the sector even if the economy slows, but may relax some tactics if necessary, political sources have said. and analysts.

NEW RISKS

New construction starts in September fell for a sixth consecutive month, according to SNB data, the longest string of monthly declines since 2015, as cash-strapped developers curbed investments and suspended projects following tightening of borrowing limits. Read more

Meanwhile, the industrial sector has been hit by power rationing triggered by coal shortages, as well as environmental restrictions on big polluters like steel plants and summer flooding. Read more

Overall industrial production rose only 3.1% in September from the previous year, marking the slowest growth since March 2020, during the first wave of the pandemic.

Aluminum production fell for the fifth consecutive month, and daily crude steel production hit its lowest level since 2018.

Contrary to the negative trend, retail sales rose 4.4%, faster than forecast and growth of 2.5% in August, and the polled national unemployment rate fell from 5.1% to 4 , 9%.

“Most of the (negative) factors are driven by policies… the economy is experiencing a lot of problems and these problems will not go away anytime soon as policies are here to stay and therefore will continue until 2022”, said Iris Pang, chief economist for Greater China at ING.

On a quarterly basis, growth slowed to 0.2% in July-September, after a downward revision of 1.2% in the second quarter.

Premier Li Keqiang said last week that China has many tools to deal with economic challenges despite slower growth, and expressed confidence in achieving annual development goals.

People’s Bank of China Governor Yi Gang said on Sunday that the economy is expected to grow 8% this year. Read more

“At present, China’s fiscal strength is steadily increasing and there is still relatively large room for maneuver for monetary policy,” said Fu of the SNB.

Nonetheless, the central bank is expected to remain cautious about monetary easing amid concerns about elevated debt and real estate risks.

Analysts polled by Reuters expect the People’s Bank of China to refrain from trying to stimulate the economy by reducing the amount of liquidity banks must hold in reserve until the first quarter of 2022.

Reporting by Kevin Yao and Gabriel Crossley; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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