China’s Growth Decelerates To 4.9% In Third Quarter
China’s growth slowed during the third quarter, failing to meet expectations of an industrial rebound in September. The country’s GDP grew by 4.9% compared to the same period last year, while experts polled by Reuters had predicted a 5.2% comeback.
Q3 2021 hedge fund letters, conferences and more
China's Growth Slows Down
The information was disclosed by the National Bureau of Statistics on Monday and quoted by CNBC. According to the news outlet, industrial production jumped by 3.1% in September, below the 4.5% expected by analysts.
Fu Linghui, spokesperson for the National Bureau of Statistics, said at a press conference, “Since entering the third quarter, domestic and overseas risks and challenges have increased,” while also pointing to how the power crunch has played a key role in the Q3 results.
The soaring prices of coal and electricity outages put a halt to the industrial sector in China, while the government scours for solutions such as increasing the supply of energy sources and guarantee availability.
“Monday’s data release also showed businesses were less keen to put money into future projects,” CNBC reports.
But not only the energy crunch has played a role in China’s disappointing third quarter, as investments in fixed assets fell short from predictions –up 7.3% from the same period last year against the 7.9% expectations.
In The Long Run
Chaoping Zhu, global market strategist at JPMorgan Chase & Co (NYSE:JPM) said, “Investment activities have been subdued as a result of the tight credit conditions.” According to Zhu’s estimates, fixed asset investment shrank by 2.5% in September YoY, driven by a 3.5% plunge in real estate investment.
The impact is significant, as 30% of China’s GDP is comprised of real estate and connected industries, which has been a driving force behind the country’s economic rebound during the pandemic.
The Evergrande crisis – Evergrande Property Services Group Ltd (HKG:6666) (OTCMKTS:EVGPF) – has underlined how debt-reliant real estate developers have become, while the government has asserted that the phenomenon is mainly attached to Evergrande itself.
Still, according to experts, a disappointing third quarter is bound to have a limited impact on the country’s overall growth as consumer spending stayed afloat with retail sales rising 4.4% in September from a year ago –compared to expectations of a 3.3% growth.
Bruce Pang of China Renaissance said, “China’s once leading growth recovery is losing momentum going into [the fourth quarter],” as intermittent Covid outbreaks and the country’s endeavors to reduce CO2 emissions will play a role.
Updated on
Source valuewalk
