China’s economic growth registered a more significant deceleration than expected in the third quarter, as the country suffers an energy crisis and the real estate sector faces stricter policies, revealed official data released on Monday (18).
The recovery of the world’s second largest economy lost momentum after the rapid recovery after the pandemic, with a 4.9% growth in Gross Domestic Product (GDP) at an annual pace in the third quarter, announced the National Bureau of Statistics (ONS).
The result was below forecasts 5% of analysts consulted by AFP and represented a slowdown after the advance of 7.9% in the period from April to June.
“We must consider that uncertainties are increasing in the international scenario and that the internal economic recovery is still unstable and uneven,” said ONS spokesman, Fu Linghui.
“Growth has been affected by a slump in the housing sector, amplified recently by the problems at Evergrande,” explained Louis Kuijs, head of Asian Economics at Oxford Economics.
The difficulties of the real estate giant Evergrande, which accumulates debt of more than 300 billion dollars, affected the spirit of potential buyers in the sector.
China’s Central Bank, however, has said that any impact from Evergrande will be manageable. The institution’s president, Yi Gang, said on Sunday at a seminar that authorities are aware of problems with a possible non-payment by some companies.
Yi also said China’s GDP is expected to grow by nearly 8% this year.
Kuijs, however, noted that the country suffered an “additional hit in September” with blackouts and production cuts due to strict enforcement of climate and security targets by local governments.
He explains that the problem was visible in the fall in industrial production, which slowed down to 3.1% year-on-year until September.
“The fragile third quarter GDP reflects a combination of negative factors such as supply chain disruptions,” commented Rajiv Biswas, chief economist for Asia Pacific at IHS Markit.
– Energy and covid –
Analysts at Fidelity International said that while real estate fears are at the “epicenter of shock,” the economic hurdle is exacerbated by the energy problem, regional closures and the “zero covid” strategy that has hit the services sector.
“The only surprise in the Chinese GDP result is that it was not even smaller,” said Paras Anand, investment director for Asia-Pacific at Fidelity.
The electricity rationing of recent weeks, the rising cost of raw materials and the government’s climate measures have led to a reduction in mining and manufacturing activities.
At the same time, retail sales grew 4.4%, against 2.5% in August, with the suspension of some sanitary containment measures in the country, which caused emergency closures in some areas affected by the virus.
The urban unemployment rate reached 4.9% in September.
The Chinese government is trying to calibrate the economy to orient it more towards consumers and less towards investment and exports.
But officials need to maintain a delicate balance between supporting growth and curbing inflation, given the fastest rise in factory prices in 25 years.
Demand remains strong, but factors such as extreme weather and outbreaks of covid – in addition to the energy crisis and the shaking of the housing market – have caused the Chinese economic slowdown, according to analysts.
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