Oct 18, 2021 08:52 PM

Update: China’s GDP Growth Slows to 4.9% Amid Power Crunch, Real Estate Woes

China’s GDP grew 4.9% year-on-year (link in Chinese) in the third quarter of 2021, official data showed Monday, as growth continued to slow amid a power crunch, soaring commodity prices and tightening restrictions on the real estate industry.

The figure came in just shy of the median estimate for 5% (link in Chinese) growth in a Caixin survey of economists. It was much lower than the 7.9% year-on-year growth rate for the second quarter and the 12.7% growth rate for the first half of the year.

In the first nine months of 2021, China’s GDP was up 9.8% year-on-year, according to data from the National Bureau of Statistics (NBS).

“There are many unstable and uncertain factors in the international environment. The domestic economic recovery is still unstable and uneven, and the challenges of maintaining the smooth operation of the economy are increasing,” NBS spokesperson Fu Linghui said at a Monday press conference (link in Chinese).

“Still, China’s economic development showed strong resilience and vitality. Overall, the trend of sustained economic recovery and the shift toward high-quality development will not change,” said Fu, who noted that China “has the ability and conditions” to achieve its annual GDP growth target of more than 6% in 2021.

China’s economic performance in September showed that industrial production and property investment took the biggest hits from regulation-induced downside risks, HSBC Bank PLC economist Chen Jingyang wrote in a research note Monday.

Value-added industrial output — which measures production by factories, mines and utilities — rose 3.1% year-on-year in September (link in Chinese), falling short of the median estimate of 3.6% in the Caixin survey — and down from the previous month’s 5.3% growth rate.

Over the past month, many regions across China have suffered power shortages due to insufficient coal supplies and intensive government scrutiny over energy consumption in an effort to meet carbon reduction goals. This situation has forced many manufacturers to suspend or curtail production.

Meanwhile, the government’s tightening restrictions on the property market further reined in investment in the sector. In the first nine months, investment in property development grew 8.8% (link in Chinese) year-on-year, slower than the 10.9% pace recorded for the first eight months.

The debt crisis of real estate giant China Evergrande Group added to worries about the growing risk of contagion in the financial system, which could push other developers, banks, suppliers and homebuyers to become more cautious, economists at Macquarie Capital Ltd. wrote in a note.

Dragged down by weakening property investment, fixed-asset investment, a key driver of domestic demand, rose 7.3% (link in Chinese) year-on-year in the first nine months, lower than the 8.9% rate of expansion in the first eight months.

Infrastructure investment — which includes spending on road and railway construction and is generally led by the government — increased 1.5% (link in Chinese) year-on-year in the first nine months, lower than the 2.9% growth rate of the first eight months.

HSBC’s Chen said it may take time for local governments to accelerate issuances of special-purpose bonds, which are used to finance infrastructure and public welfare projects, as regulators remain vigilant about local government debt risk. Still, she expects that issuance of such debt will pick up in the fourth quarter, which may lead to a moderate rebound in infrastructure investment toward the end of the year.

Consumption was one bright spot in the September economic numbers. Retail sales — which include spending by households, governments and businesses — rose 4.4% (link in Chinese) year-on-year in September, higher than August’s rate of 2.5%. That was largely supported by a partial recovery in services consumption as China had Covid-19 under better control than in the previous month, Chen said.

Looking ahead, Chen forecast that China’s GDP growth will slow to 4.6% year-on-year in fourth quarter. Economists at Nomura International (Hong Kong) Ltd. predicted that economic growth will slow to 3% in the fourth quarter, with Macquarie forecasting around 4%.

Louis Kuijs, head of Asia Economics at Oxford Economics Ltd., forecast that GDP growth will slow to 3.6% year-on-year in the fourth quarter, but policymakers won’t be idle. “In response to the ugly growth numbers we expect in coming months, policymakers will 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,” he wrote.

 Read more  
Caixin’s coverage about Evergrande’s debt crisis

Contact reporter Tang Ziyi ( and Michael Bellart (

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