(CapitalWatch, Oct. 18, Beijing) China recorded a significant economic slowdown in the third quarter after supply chain shortages, power cuts, floods, and woes in the real estate market.
The National Bureau of Statistics (NBS) said on Monday that GDP growth was 4.9% in the three months through September compared with 7.9% in the preceding quarter. That's the slowest growth China has seen since the nationwide lockdowns during the Covid-19 outbreak in 2020.
The month of September was especially tough, with industrial output up 3.1% year-over-year after 5.3% growth in August and 6.4% rise in July.
"The current international environment uncertainties are mounting, and the domestic economic recovery is still unstable and uneven," said NBS spokesperson Linghui Fu.
Some positive indicators came up in exports and retail sales amid the surging post-Covid-19 demand. Third-quarter exports rose 10.2% year-over-year to 5 trillion yuan ($742.9 billion) and imports rose 4.3% to 3.9 trillion yuan. For September alone, China reported better-than-expected import and strong export figures, at 13.2% and 9.9% growth year-over-year, respectively. Last month, the nation counted record import-export goods volume, according to Reuters.
Retail sales last month improved 4.4% from a year ago. Even as the working class has been spending less due to hour cuts at factories, the more well-off population has increased buying at restaurants and other services as authorities were able to quickly stamp out small Covid-19 outbreaks. In the nine months through September, consumer goods sales increased 16.4% and the catering sector saw revenue increase of 29.8%, according to NBS data. Online consumption grew 18.5% in the first three quarters.
Currently, China continues to battle crises in several sectors. The aforementioned factory operations have been under pressure amid surging demand and an extreme power crunch. China's tight coal and electricity supply, as well as rising international energy prices have attributed to blackouts in certain regions. The slowdown in coal production has been attributed to Beijing's drive for cleaner air, but the government also urged curbs on electricity during a period of peak demand for manufacturers, in turn slowing down industrial output.
That led in turn to the surging producer price index – meaning the cost of goods produced – which hit a record 10.7% in September. And the problem affects not only China, but the global supply chains and the climbing global inflation, as CNN Business reported.
Troubles in real estate have also weighed on China's economy figures. The downfall of China Evergrande Group (HKEX: 3333; OTC: EGRNF) is sending ripples across various industries and hurting millions in the process. The number of Evergrande's unfinished projects is estimated at 800 and the number of apartments owed to home buyers at 1.6 million, with suppliers, developers, and workers gone unpaid. Not to mention Evergrande's missed payments to individual investors at its wealth management business as well as to big investors and creditors.
Beijing Says Problems Under Control
Even as rumors about Evergrande's impending bankruptcy flooded the internet, the government continues to ease the panic and proclaim stability and rebound across problem sectors. Last week, the People's Bank of China said the financial risks related to Evergrande's collapse are "controllable" and pledged help for individual home buyers. PBoC's Lan Zou said on Friday that the property market's slump is normal considering Evergrande's "blind" expansion and the developer should fulfill its debt obligations. Zou also pledged financial support on Evergrande's unfinished projects.
Similarly, NBS spokesperson Fu addressed the power shortage saying it is temporary and its impact is under control. Earlier, the China Electricity Council said coal-fired power companies are "expanding their procurement channels at any cost" to provide heat and electricity for winter. Fu said additional measures on power supply and prices will gradually take effect and ease the power crunch. According to NBS, power generation in September rose 4.7 percentage points from August.
State-run news agency Xinhua released an optimistic report on Monday, focusing on what it called "stable growth" in the nine-month figures rather than the recent slowdown. From January through September, China's GDP rose 9.8% and industrial output improved by 11.8% from a year ago. The medium cited Fu as saying that despite the troubles, "the momentum for China's industrial upgrade has not been impeded."
Positive nine-month figures also include 20.1% growth in high-tech manufacturing thanks to 172.5% increase in NEV sector, 57.8% growth in industrial robot production and 43.1% growth in chipmaking. The private sector logged 13.1% growth and state-owned enterprises were at 9.6%.
Earlier, analysts have cut their annual forecasts on China. Goldman Sachs reduced its annual GDP growth estimate to 7.8% from 8.2%. ANZ Bank lowered its target to 8% from 8.3%. Nomura's chief China economist cuts his forecast to 7.7% from 8.2%.