China Economic Growth Weakens 10/18 06:42
China's economic growth is sinking under pressure from a construction
slowdown and power shortages, prompting warnings about a possible shock to its
trading partners and global financial markets.
BEIJING (AP) -- China's economic growth is sinking under pressure from a
construction slowdown and power shortages, prompting warnings about a possible
shock to its trading partners and global financial markets.
The world's second-largest economy grew by a weaker-than-expected 4.9% over
a year ago in the three months ending in September, down from the previous
quarter's 7.9%, government data showed Monday. Factory output, retail sales and
investment in construction and other fixed assets all weakened.
Manufacturing has been hampered by official curbs on energy use and
shortages of processor chips and other components due to the coronavirus
pandemic. Construction, an industry that supports millions of jobs, is slowing
as regulators force developers to cut reliance on debt that Chinese leaders
worry is dangerously high.
"Ripple effects to the rest of the world could be significant" due to weaker
Chinese demand for raw materials, said Mo Ji of Fidelity International in a
report. "Even developed markets, including the U.S., would not be immune to a
significant tightening in global financial conditions as a result of a negative
China growth shock accompanied by financial stress."
Compared with the previous quarter, the way other major economies are
measured, output barely grew in the July-September period, expanding by just
0.2%. That was down from 1.2% in the April-June period and one of the past
decade's weakest quarters.
The slowdown adds to pressure on Beijing to prop up activity by easing
borrowing controls and spending more on building public works. But forecasters
said even if that happens, activity will weaken before policy changes take
"Growth will slow further," Louis Kuijs of Oxford Economics said in a report.
Chinese leaders are trying to steer the economy to more sustainable growth
based on domestic consumption instead of exports and investment and to reduce
Construction and housing sales, an important source of demand for steel,
copper and other industrial imports, have slowed since regulators ordered
developers to reduce their debt levels.
One of the biggest, Evergrande Group, is struggling to avoid defaulting on
$310 billion owed to banks and bondholders. That has fueled fears about other
developers, though economists say the threat to global financial markets is
Factories in some provinces were ordered to shut down in mid-September to
avoid exceeding official goals for energy use and energy intensity, or the
amount used per unit of output. Some warned deliveries of goods might be
delayed, raising the possibility of shortages of smartphones and other consumer
products ahead of the Christmas shopping season.
Factory output barely grew in September, expanding by only 0.05% compared
with August. That was down from the 7.3% growth for the first nine months of
Private sector forecasters have cut their growth outlook this year for
China, though they still expect about 8%, which would be among the world's
strongest. The ruling Communist Party's official target is "more than 6%,"
which leaves Beijing room to keep its controls in place.
The near-term outlook "remains difficult," said Rajiv Biswas of IHS Market
in a report. Real estate also is suffering from "fears of contagion to some
other property developers."
This year's economic figures have been exaggerated due to comparison with
2020, when factories and stores were closed to fight the coronavirus.
Output grew by a record 18.3% in the first quarter of 2021, but forecasters
said the rebound already was leveling off.
In September, growth in retail spending weakened to 4.4% over a year
earlier, down from 16.4% in the first nine months.
Investment in real estate, factories, housing and other fixed assets rose
0.17% in September, down from 7.3% for the first nine months.
The latest figures indicate "the property sector fallout will be a
significant drag on growth in the coming quarters," said Fidelity's Mo. "Even
significant policy easing now, which is still unlikely in our view, will take
time to propagate into the real economy."
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 production was disrupted by shortages of
Imports, an indicator of Chinese domestic demand, rose 17.6% in September
over a year earlier, but that was about half the previous month's 33% growth.