China economy hit its slowest pace in a year in third quarter

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China economy hit its slowest pace in a year in third quarter

China's economy hit its slowest pace of growth in a year in the third quarter, hurt by power shortages, supply chain bottlenecks and major wobbles in the property market and raising pressure on policymakers to do more to prop up the faltering recovery.

Data released on Monday showed gross domestic product grew by 4.9 percent from July to September compared with a year earlier, the weakest clip since the third quarter of 2020 and missing forecasts.

The world's second largest economy is facing several major challenges, including the China Evergrande Group debt crisis, permanent supply chain delays and a critical electricity crunch that sent factory output to its weakest since early 2020 when heavy COVID - 19 curbs were in place.

The domestic economic recovery is still unstable and uneven, said Fu Linghui at a training on Monday in Beijing.

The recovery has lost steam from the blistering 18.3 percent growth clocked in the first quarter of this year.

In response to the ugly growth numbers that we expect in coming months, we think policymakers will take more steps to shore up growth, including ensuring ample liquidity in the Interbank Market, accelerating infrastructure development and relaxation some aspects of global credit and real estate policies, said Louis Kuijs, head of Asia economics at Oxford Economics.

A Reuters poll of analysts had expected GDP to rise 5.2 percent in the third quarter.

The weak numbers sent the Yuan and most Asian stock market lower amid broader investor concerns about the recovery of global economy.

Global worries about a possible spillover of credit risk from China's property sector into the wider economy have also intensified as major developer China Evergrande Group wrestles with more than $300 billion of debt.

Chinese leaders, fearful that a persistent property bubble would undermine the country's long-term ascent, are likely to keep tough curbs on the sector even when the economy slows, but could soften some tactics as needed, policy sources and analysts said.

The construction industry looked for a seventh straight month in September as the NBS data show, the longest spate of monthly declines since 2015, as cash-strapped developers reined in investment and paused projects following tighter borrowing limits.

The industrial sector has been hit by heavy polluters like coal shortages and floods over the summer, as well as by power rationing at coal plants and floods.

In September, industrial output rose just 3.1 percent, compared to one year earlier, marking the slowest growth since March 2020 in the very first wave of the pandemic.

The crude steel production hit fifth consecutive month and the daily aluminium output fell to the lowest level since 2018.

The national jobless rate of retail sales grew 4.4 percent, faster than forecasts and higher than the 3 percent growth in August, and the surveyed nationwide jobless rate fell from 5.1 percent to 4.9 percent.

Almost all the negative factors are policy-driven. the economy is having a lot of pain points and these pain points are not going away soon because policies are here to stay and will therefore continue into 2022, said Iris Pang, chief economist for Greater China at ING.

On a quarterly basis, growth was revised to 0.2 percent from July to September compared with a downwardly positive 1.2 percent in the second quarter.

Premier Li Keqiang said last week that China has ample tools to deal with economic challenges despite slowing growth and expressed confidence in meeting full-year development goals.

On Sunday, People's Bank of China governor Yi Gang said the economy is expected to grow 8 percent this year.

At present, China's fiscal strength is continuously increasing and there is still relatively big room for monetary policy, said the NBS's Fu.

Still, the central bank is expected to remain cautious about monetary easing because of worries about high debt and property risks.

Analysts polled by Reuters expect the People's Bank of China to stop from attempts to stimulate the economy by temporarily deregulating the amount of cash banks must hold in reserve until the first quarter of 2022.