BEIJING (NWN) – China’s economic growth sank in the latest 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% in July-September from a year ago, down from 7.9% in the previous quarter, government data showed on Monday. Factory production, retail sales and investments in construction and other fixed assets all weakened.
Growth under pressure from government controls aimed at making the energy-hungry economy more efficient and reducing its dependence on debt is dangerously high and can cause financial problems. Manufacturing has also been disrupted by shortages of processor chips and other components due to the pandemic.
Compared to the previous quarter, the way other major economies are measured, output barely grew in the July-September period, expanding only 0.2%. This was down from 1.2% in the April-June period and one of the weakest quarters of the last decade.
“The pace of growth will slow further,” said Louis Kuijs of Oxford Economics in a report. He said the “ugly growth numbers” in the coming months are likely to see Beijing try to boost activity by easing lending controls and encouraging infrastructure development.
Construction, an industry that supports millions of jobs, has slowed as regulators tightened controls on borrowing by developers last year.
Evergrande Group, one of the largest, 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 small.
Manufacturing has been hit by power cuts imposed by some major provinces to avoid exceeding official efficiency targets.
Factory production barely grew in September, expanding only 0.05% compared to August. This was down from growth of 7.3% for the first nine months of the year.
Private sector forecasters have cut their growth outlook for China this year, though they still expect it to be around 8%, one of the world’s strongest. The ruling Communist Party’s official target is “over 6%”, which leaves Beijing to keep its control.
“The near-term outlook for China’s economy in Q4 remains difficult for the Chinese economy due to the potential impact of continued winter power shortages and continued slowdown in the property sector,” Rajiv Biswas of IHS Markets said in a report. “The real estate sector is affected by uncertainties related to Evergrande loan problems and transition fears for some other property developers.”
This year’s economic data has been inflated compared to 2020, when factories and stores were closed to fight the coronavirus.
The economy grew by a record 18.3% in the first quarter of 2021, but forecasters said the rebound was already off.
In September, growth in retail spending weakened to 4.4% from a year earlier, from 16.4% in the first nine months.
Investment in real estate, factories, housing and other fixed assets grew 0.17% in September, down from 7.3% in the first nine months.
Auto sales in the global industry’s biggest market fell 16.5% in September from a year earlier, according to the China Association of Automobile Manufacturers. The group said a shortage of processor chips has hampered production.
Imports, an indicator of Chinese domestic demand, rose 17.6% in September from a year earlier, but it was barely half the 33% increase from the previous month.
National Bureau of Statistics (in Chinese): www.stats.gov.cn