The Chinese economy grew 4.9% from July to September quarter-year-on-year, the slowest pace in a year and worse than analysts had predicted.
This was much slower from the previous quarter as growth was almost 8%, suggesting that recovery is weakening.
Lack of power, eruptions of Covid-19 and pressure from Beijing on a number of industries are taking their toll.
These developments could dampen growth for the rest of the year and should not be underestimated, said one expert.
The world’s second-largest economy has faced a number of challenges in recent months. First, when it comes to energy supply, world commodity prices have affected the cost of raw materials.
This came at a time when Beijing was increasing pressure on regional governments to reduce their carbon emissions in line with the country’s goal of being carbon neutral by 2060.
Many provinces have implemented electricity rations, closing down blackouts for homes and factories.
This coincided with the country’s largest coal province, which is suffering from floods. The Shanxi region produces about 30% of China’s coal.
The heavy rains caused the coal price to rise to fresh heights and the government to abandon the production capsule.
Power outages have affected many industries in the country, particularly those that use a lot of energy, including cement production, steel and aluminium smelters.
China “factory gate” prices – a measure of what manufacturers wholesalers charge for products – have felt these effects are growing at the fastest rate since records began 25 years ago.
“The downturn in the industry looks set to deepen,” said Capital Economics senior China economist Julian Evans-Pritchard, with thermal coal prices still rising.
This came at a time when China’s property sector was facing increasing pressure to repay its debt.
The most notable example, the China Evergrande Group, owes more than $ 300 billion and is on the edge of the standard.
Another real estate developer Fantasia standardized while Sinic Holdings warned it risked going the same way, provoking fears of bigger problems.
“The extension in the real estate sector affects the activities of companies in areas such as building contracts, building materials, and home furniture,” said Yue Su of the Economist Intelligence Unit.
Despite this, the Chinese central bank reduced the risk of contagion over the weekend, breaking its silence over the crisis.
Evergrande’s “financial liabilities make up less than a third of its total liabilities, and creditors are different,” said Zou Lan, a director of the People’s Bank of China.
“Individual financial institutions are not at high-risk exposure to Evergrande. Its spillover risks to the financial industry are generally controllable.”
Woei Chen Ho, an economist at United Overseas Bank in Singapore, says the energy crisis and the recovery of the real estate sector mean that the bank will lower its growth forecast for China for the year.
“The numbers are actually much weaker than we thought. I think in the fourth quarter, it will be even slower because we see more impact of the energy crisis.”
From big tech to gaming in the education sector, a number of China’s largest companies are up against political sidewalks aimed at social transformation.
The Chinese government has unveiled a five-year plan, proving that this shortcut will last for years.
While these reforms are aimed at long-term growth, they currently weigh on household consumption and investment, according to Chaoping Zhu of JP Morgan Asset Management.
“Short-term shocks seem inevitable when various policy measures have been introduced in a short period of time since July,” he said.
quarter-year-on-year, the slowest pace in a year and worse than analysts had predicted.
This was much slower from the previous quarter as growth was almost 8%, suggesting that recovery is weakening.
Lack of power, eruptions of Covid-19 and pressure from Beijing on a number of industries are taking their toll.
These developments could dampen growth for the rest of the year and should not be underestimated, said one expert.
The world’s second-largest economy has faced a number of challenges in recent months. First, when it comes to energy supply, world commodity prices have affected the cost of raw materials.
This came at a time when Beijing was increasing pressure on regional governments to reduce their carbon emissions in line with the country’s goal of being carbon neutral by 2060.
Many provinces have implemented electricity rations, closing down blackouts for homes and factories.
This coincided with the country’s largest coal province, which is suffering from floods. The Shanxi region produces about 30% of China’s coal.
The heavy rains caused the coal price to rise to fresh heights and the government to abandon the production capsule.
Power outages have affected many industries in the country, particularly those that use a lot of energy, including cement production, steel and aluminium smelters.
China “factory gate” prices – a measure of what manufacturers wholesalers charge for products – have felt these effects are growing at the fastest rate since records began 25 years ago.
“The downturn in the industry looks set to deepen,” said Capital Economics senior China economist Julian Evans-Pritchard, with thermal coal prices still rising.
This came at a time when China’s property sector was facing increasing pressure to repay its debt.
The most notable example, the China Evergrande Group, owes more than $ 300 billion and is on the edge of the standard.
Another real estate developer Fantasia standardized while Sinic Holdings warned it risked going the same way, provoking fears of bigger problems.
“The extension in the real estate sector affects the activities of companies in areas such as building contracts, building materials, and home furniture,” said Yue Su of the Economist Intelligence Unit.
Despite this, the Chinese central bank reduced the risk of contagion over the weekend, breaking its silence over the crisis.
Evergrande’s “financial liabilities make up less than a third of its total liabilities, and creditors are different,” said Zou Lan, a director of the People’s Bank of China.
“Individual financial institutions are not at high-risk exposure to Evergrande. Its spillover risks to the financial industry are generally controllable.”
Woei Chen Ho, an economist at United Overseas Bank in Singapore, says the energy crisis and the recovery of the real estate sector mean that the bank will lower its growth forecast for China for the year.
“The numbers are actually much weaker than we thought. I think in the fourth quarter, it will be even slower because we see more impact of the energy crisis.”
From big tech to gaming in the education sector, a number of China’s largest companies are up against political sidewalks aimed at social transformation.
The Chinese government has unveiled a five-year plan, proving that this shortcut will last for years.
While these reforms are aimed at long-term growth, they currently weigh on household consumption and investment, according to Chaoping Zhu of JP Morgan Asset Management.
“Short-term shocks seem inevitable when various policy measures have been introduced in a short period of time since July,” he said.