China’s economic growth slowed more than expected in the third quarter, official data showed yesterday, as a crackdown on the property sector and a looming energy crisis began to bite.
After swiftly bouncing back from the COVID-19 pandemic, recovery in the world’s second-biggest economy is losing steam, with GDP expanding 4.9 percent year-on-year, the Chinese National Bureau of Statistics said, citing an “unstable and uneven” domestic rebound.
The reading was just short of the 5 percent tipped by analysts polled by Agence France-Presse (AFP) — and a sharp 3 percentage points off the April-to-June performance.
Photo: AFP
“Current international environment uncertainties are mounting, and the domestic economic recovery is still unstable and uneven,” bureau spokesman Fu Linghui (傅令輝) told reporters.
The economy grew only 0.2 percent from the previous three months, the weakest since a historic contraction in the first quarter last year.
“Growth was dragged down by a slowdown in real estate, amplified recently by spillover from Evergrande’s travails,” said Louis Kuijs, head of Asia economics at Oxford Economics.
The struggles of property giant China Evergrande Group (恆大集團) — which is drowning in more than US$300 billion of debt — has battered sentiment among prospective buyers.
A government regulatory clampdown on the real-estate sector — particularly the tightening of lending rules — has dealt a severe blow to a crucial driver of economic growth, with a knock-on effect for other parts industries, including construction.
Investors are now keeping a worried eye on developments in the Evergrande saga, concerned that it could affect the wider economy.
However, the People’s Bank of China at the weekend said that any financial sector fallout would be controllable, while central bank Governor Yi Gang (易綱) told a seminar on Sunday that authorities were watching for problems like default risks “due to mismanagement and breakneck expansion” at some firms.
In a sign of the ongoing weakness in the property market, home sales by value slumped 16.9 percent year-on-year last month, following a 19.7 percent decline in August, AFP calculations based on official data showed.
Real-estate investment slid for the first time since the onset of COVID-19 shut swathes of the economy at the beginning of last year, down 3.5 percent from a year earlier, calculations showed.
Kuijs said that there was an “additional hit in September” from electricity shortages and production cuts caused by the strict implementation of climate and safety targets by local governments.
The added damage was visible in weaker industrial output, which slowed to 3.1 percent year-on-year, he said.
Fidelity International analysts said that while property fears were the “epicenter of the shock,” economic drag was being exacerbated by the power crunch, regional lockdowns and a “zero COVID” strategy that hit disposable income and the services sector.
However, there were some bright spots, with retail sales rising 4.4 percent — up from 2.5 percent in August — as virus containment measures were eased in the country, which has imposed swift local lockdowns over a handful of cases. The urban unemployment rate also dipped slightly to 4.9 percent.
Kuijs said that although electricity shortages and production cuts would be controlled in the fourth quarter, “the pending real-estate downturn will continue to weigh substantially on growth.”
The weak GDP figure has added to speculation that officials might announce a cut in the amount of cash banks must keep in reserve, providing liquidity to the financial system.
However, they have to walk a fine line between supporting growth and keeping a lid on inflation.
GDP is still expected to grow about 8 percent for the whole year, Yi said.
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