China’s economic growth slumped to its slowest pace in a year in the third quarter, as a property slowdown and energy shortages highlighted rising pressure on policymakers.
Gross domestic product grew 4.9 per cent year-on-year in the third quarter, according to data released by the National Bureau of Statistics on Monday, compared with 7.9 per cent in the three months ending in June.
On a quarter-on-quarter basis, growth was just 0.2 per cent.
The figures add to the pressure building on President Xi Jinping as he enters the final year of his second term and pursues an ambitious “common prosperity” strategy, an effort to tackle “excessively high incomes” and encourage wealth redistribution.
The Chinese leader’s priorities include a crackdown on leverage in the struggling property sector that could mark a shift away from the country’s debt-fuelled economic model.
Policymakers are also grappling with an energy crisis that has led to power rationing across the country, pushed factory gate inflation to its highest level since 1995 and forced the government to increase coal production despite pledges to reduce carbon emissions made last year.
China has also had to deal with coronavirus outbreaks, which have led to the imposition of travel restrictions.
“After entering the third quarter, risks and challenges at home and abroad increased with the pandemic continuing to spread and the recovery of the world economy slowing down,” said Fu Linghui, a spokesman for the National Bureau of Statistics.
Fu added that the “impact of tight energy supply on the economy” was “temporary” and the real estate market had “generally stabilised”.
Tommy Wu, lead economist at Oxford Economics, said “the electricity shortages and production cuts will become less of a problem” in the fourth quarter but the real estate downturn “should weigh substantially” on growth to the end of the year.
“We expect more measures to shore up growth, including ensuring ample liquidity in the interbank market, accelerating infrastructure development and relaxing some aspects of credit and real estate policies,” he said.
People’s Bank of China officials made no reference to any potential cut in the reserve ratio requirement, a way of freeing up liquidity, in a briefing on Friday.
China’s economy far outperformed other developed countries in 2020, driven by a construction boom, higher industrial activity and soaring exports, after new Covid cases slowed to a trickle by the middle of the year.
But the latest data reflect a loss of momentum, with industrial production growing 3.1 per cent in September and edging just 0.1 per cent higher month-on-month. Retail sales, a gauge of consumer spending that has lagged behind the wider recovery in part because of strict anti-coronavirus travel restrictions, beat expectations to grow 4.4 per cent.
The country’s reliance on a credit-fuelled investment binge to counter the drag of the pandemic, combined with a series of bank reserve cuts in mid-2020, led to surging home prices in major cities.
But the government has moved to constrain mortgage lending and borrowing by property developers, casting a shadow over a sector that contributes more than a quarter of economic output.
Last month Evergrande, China’s second-largest developer by sales, missed a series of bond payments, leading to a collapse in investor demand for bonds issued by other property groups.
Property investment has risen 8.8 per cent in 2021, while fixed asset investment was up 7.3 per cent. But new building construction starts are down 4.5 per cent by area this year.
The PBoC has indicated it is not inclined to help Evergrande, which is expected to undergo one of the country’s largest ever restructurings in the coming weeks and months, and said on Friday the spillover was “controllable”.
Despite China’s broader economic slowdown, exports grew 28 per cent last month year-on-year in dollar terms, in a sign of resilience for the country’s trade sector despite the energy crisis and other supply chain challenges.
The CSI 300 index of Shanghai and Shenzhen stocks was down as much 1.8 per cent after the data were released.
Additional reporting by Xinning Liu in Beijing and Hudson Lockett in Hong Kong