SHANGHAI - - China's economic growth continued to decelerate in the third quarter, as gross domestic product fell by 4.9%, made more sensitive by the country's zero-tolerance COVID measures and energy shortages.
The year-on-year GDP growth rate was published on Monday by the National Bureau of Statistics for the period of September through October, below the median 5% expansion forecast by 29 economists in a Nikkei poll released earlier this month.
The figure was down from 7.9% in the April to June quarter, weighed down by high commodity prices amid uncertainty generated by China Evergrande Group's debt crisis, which is piling risk onto property and banking sectors.
The reading also reflects weak overall activity, including in manufacturing and consumer spending. Retail sales of consumer goods, a barometer of household spending, edged up by 4.4% in September, compared to 2.5% in August, but was still well below the double-digit growth that had continued till June.
Certain factors have convinced economists to be cautious, at least in the near-term. Rising coal prices have beaten the profitability of electricity providers, making them unwilling to generate power. As it prioritizes supplying power to sectors that touch everyday life, the government is capping supplies to the steel, cement and other energy-intensive industries. The result is more consumption and less production.
The statistics office had announced last week that the factory price index for manufactured goods rose from one year earlier to 9.7%, the strongest surge in the past 25 years as far back as comparable data goes.
The government forecasts the China's economy to grow for all of 2021, and the Asian Development Bank Projects 8% and the International Monetary Fund 8.1%.
The economy expanded 9.8% in the first nine months of the year, largely driven by trade as both exports and imports jumped nearly 23% in yuan terms.
Service sector expansion of 19.3%, led by software and information technology services, also stoked the nine-month expansion.
The statistics office said GDP grew 0.2% in the third quarter of the previous three months, which the U.K. s capital economics team noted is the second highest since China began revealing such data in 2010.
Growth lost more steam in September as official production declined to 3.1% from 5.3% in August, while the Industrial Production Purchasing Managers Index fell to 49.6. It slipped below 50 -. The Statistics office says the overall economy is in recession - for the first time since February 2020.
While officials have been playing down the country's power crunch and worries over the Evergrande crisis.
The energy supply shortage is controlled, and its impact on the economy is temporary, Fu Lingxuan, the National Bureau of Statistics' spokesperson, told reporters on Monday citing recent measures to boost coal supply.
Evergrande, director of financial markets at the country's central bank, said Zou Lan had blindly diversified and expanded business, urging the property group to offload assets to raise funds to pay off debts.
The risk exposure of individual financial institutions to Evergrande is not bigger and the spillover effect for the financial sector is controllable, Zou said on Friday.
While fallout from the power shortages and concerns over the property market may have eased from September, their impact on China's broader economy should not be underestimated and will be a major downside risk in the fourth quarter, warned Shanghai-based Yue Su, principal economist at The EconomistEconomist Intelligence Unit.
The slowdown in the property sector will affect the activities of firms in areas such as construction contracting, building materials and home furnishing, said Su, adding that energy-intensive industries will face rising costs as well.
Hong Kong-based Tommy Wu of Oxford Economics said policymakers are likely to take more steps to shore up growth, including ensuring ample liquidity in the interbank market, accelerating infrastructure development and relaxing some aspects of overall credit and real estate policies.
With China's widely published data, not all economists agree with them.
Julian Evans-Pritchard of U.K. - based Capital Economics said the research firm's back-to-house measure, the China Activity Proxy, tracked a sharp 1.9% quarter-on-quarter contraction in the third quarter compared to a 3.0% expansion in the previous quarter.
For now the blow from a very strong property downturn is being softened by deepening exports, said Evans-Pritchard. However, over the coming year global demand is likely to drop as global consumption patterns normalize coming out of the pandemic and backlogs of orders gradually become cleared. Shanghai Composite Index hit 0.92% in the morning, before closing on the midday break down 0.35%.