Introduction: China’s economy slows as risks rise
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Beijing has warned that economic risks have risen at home and abroad, after China’s economic growth was dragged down by power shortages and its housing crunch.
China’s GDP grew by just 0.2% in July-September, new figures this morning show, the weakest quarterly growth on record.
That dragged growth over the last year down to just 4.9%, down from 7.9% in the previous quarter, and worse than expected.
The slowdown highlights that China is still struggling after the coronavirus pandemic, amid a slew of problems at home and abroad — from power outages and supply bottlenecks to ongoing Covid outbreaks and concerns about the struggling property sector typified by the Evergrande crisis.
The GDP report shows a worrying loss of momentum — industrial production grew just 3.1% year-on-year in September, rising just 0.1% during the month.
Growth in Fixed Asset Investment slowed to 7.3% from 8.9%.
Fu Linghui, spokesperson for the National Bureau of Statistics, told a press conference Monday that:
“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.”
China’s energy crunch has hit manufacturing growth. Recent power shortages led to rationing – causing some factories to shut down — prompting Beijing to order coal mines to increase production and plan to build more coal-fired power plants
Surging commodity costs have also hit manufacturing, pushing up factory gate inflation as manufacturers have passed on those costs.
China’s CSI 300 stock index fell by 1.3%, with concerns over Evergrande also hitting the real estate sector.
My colleague Martin Farrer explains:
The world’s second-largest economy has staged an impressive rebound from the pandemic but the recovery is losing steam. Problems including faltering factory activity, power cuts in the country’s crucial northern industrial heartland, and a slowing property sector have fanned speculation that policymakers may announce more stimulus measures in coming months.
Chief among the concerns about the giant property sector is the future of China Evergrande Group, the country’s number two developer which is struggling under a $300bn mountain of debt.
It has already missed three repayments on bonds that it owes overseas investors in US dollars, and trade in its shares in Hong Kong has been suspended since 4 October.
The crisis could reach a head this week when the 30-day grace period is up on the first tranche of repayments – worth $83.5m – that were missed in September .
But the head of China’s central bank, Yi Gang, said on Sunday the economy was “doing well” although it faced challenges such as default risks for certain firms due to “mismanagement”.
Reaction to follow…
- 2.15pm BST: UK industrial production report for September
- 3pm BST: NAHB housing market index (US) for October