China's economy hit its slowest rate of growth in the third quarter in a year, 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 faltering recovery.
Data released on Monday showed gross domestic product GDP grew 4.9% from a year earlier in July-September, 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, chronic supply chain delays and a critical electricity crunch, which sent factory output to its weakest since early 2020 when heavy COVID 19 curbs were in place.
The domestic economic recovery is still uneven and unstable, said NBS spokesperson Fu Linghui at a briefing in Beijing on Monday.
But the recovery has lost steam from the blistering 18.3% growth clocked in the first quarter of this year.
In response to the ugly growth numbers we expect in coming months, we think policymakers will take more steps to curb growth, including ensuring adequate liquidity on the interbank market, accelerating infrastructure development and relaxing some aspects of global credit and real estate policies, said Louis Kuijs, head of Asia economics at Oxford Economics.
Reuters poll of analysts had expected GDP to rise 5.2% in the third quarter.
The weak numbers sent the Yuan and most Asian stock markets lower amid broader investor worries about the global economic recovery.
Global worries about 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 could undermine the country's long-term ascent, are likely to lower sharp curbs on the sector even with the economy slowing, but will soften some tactics as needed, policy sources and analysts said.
New construction starts in September slumped for a sixth straight month, NBS data showed, the longest spate of monthly declines since 2015 as cash-strapped developers reined in investment and halted projects following tighter borrowing limits.
Meanwhile, the industrial sector has been affected over the summer by coal shortages, as well as power cuts to environmental polluters like steel plants and floods.
Overall industrial output rose just 3.1% in September from a year earlier, it marking the slowest growth since March 2020, during the first wave of the pandemic.
The crude output for the fifth consecutive month was declined and the daily crude steel output hit the lowest level since 2018.
Retail sales bucking the negative trend were 2.5%, faster than forecasts and retail sales in August expanded. The surveyed nationwide jobless rate fell from 5.1% to 4.9%.
Most of the negative factors are policy-driven. the economy is having a lot of pain points and these pain points are not going away quickly because policies are here to stay and therefore will continue until 2022, said Iris Pang, chief economist for Greater China at ING.
On a quarterly basis, growth expanded by 0.2% in July-September from a downwardly revised 1.2% in the first quarter.
Premier Li Keqiang said last week that China has ample tools to cope with economic challenges despite slowing growth, and expressed confidence in hitting full year development goals.
On Sunday, People's Bank of China governor Yi Gang said the economy is expected to grow 8% this year.
At present, China's fiscal strength is slowly increasing and there is still relatively large room for monetary policy, said the NBS Fu.
Still, the central bank is expected to remain cautious about monetary easing due to worries about high debt and property risks.
Analysts polled by Reuters expect the People's Bank of China to refrain from attempts to stimulate the economy by reducing the amount of cash banks must hold in reserve until the first quarter of 2022.