The economy slowed as the Evergrande Group debt crisis spilled over to the property market halting construction activity, land sales and financing. Power cuts forced factories to reduce output or shut down.
File photo of Shanghai city (Unsplash)
China’s National Bureau of Statistics (NBS) on October 18 said the country’s GDP growth rate for the third quarter was 4.9 percent, which was lower than the median forecast of 5 percent and far from 7.9 percent recorded a year ago, Bloomberg reported.
The country’s economy slowed down as the Evergrande Group debt crisis spilled over to the property market, halting construction activity, land sales, and sector financing. Another factor was power cuts in September, which forced factories to cut down output or go for a complete shutdown.
Both these crises impacted heavily the steel and cement sectors. Further, the Covid-19 restrictions dragged consumer spending, affecting the growth numbers.
The NBS in also said that economic recovery “remains unbalanced, though China will ensure it can achieve its annual targets”.
Helen Qiao, chief Greater China economist at Bank of America Corporation, told Bloomberg TV that the investment-side demand was “pretty weak”, while the impact of power problems on the supply side was also severe. She added that the fourth-quarter growth would drop to 3-4 percent.
Even prior to the power and real estate slumps, the expectations for growth were slow, but the actual slowdown “surprised economists” and prompted full-year GDP downgrades.
People’s Bank of China Governor Yi Gang forecast that the economy would expand by 8 percent this year, with “moderated” growth. Economists expect targeted monetary and fiscal support with small cut in the central bank’s reserve ratio requirements, the report said.
