China’s Economic Growth Weakens Amid Slowing Construction | WGN 720 radio

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BEIJING (AP) – China’s economic growth slumps under pressure from a construction slowdown and power shortages, prompting warnings of a possible shock to its trading partners and global financial markets .

The world’s second-largest economy grew 4.9% weaker than expected over a year ago in the three months to September, down from 7.9% in the previous quarter, according to the government data released Monday. Manufacturing output, retail sales, and investment in construction and other fixed assets all weakened.

Manufacturing has been hampered by official restrictions on power consumption and shortages of processor chips and other components due to the coronavirus pandemic. Construction, an industry that supports millions of jobs, slows as regulators force developers to reduce their reliance on debt which Chinese officials say is dangerously high.

“The ripple effects on the rest of the world could be significant” due to the decline in Chinese demand for commodities, Fidelity International’s Mo Ji said in a report. “Even developed markets, including the United States, would not be immune to a significant tightening in global financial conditions following a negative growth shock in China accompanied by financial strains.”

Compared to the previous quarter, depending on how other major economies are measured, output barely increased in the July-September period, increasing only 0.2%. This was down from 1.2% during the April to June period and one of the weakest quarters of the past decade.

The slowdown comes on top of pressure on Beijing to support activity by relaxing borrowing controls and spending more on public works construction. But forecasters said even if that happened, activity would weaken before the policy changes took effect.

“Growth will slow down further,” Louis Kuijs of Oxford Economics said in a report.

Chinese leaders are trying to steer the economy towards more sustainable growth based on domestic consumption rather than exports and investment and reduce financial risk.

Construction and housing sales, a major source of demand for steel, copper and other industrial imports, have slowed since regulators ordered developers to reduce their debt levels.

One of the biggest, Evergrande Group, is struggling to avoid defaulting on $ 310 billion owed to banks and bondholders. This has fueled fears about other developers, although economists say the threat to global financial markets is low.

Factories in some provinces have been ordered to close in mid-September to avoid exceeding official targets for energy use and energy intensity, or the amount used per unit of output. Some have warned that merchandise deliveries could be delayed, raising the possibility of shortages of smartphones and other consumer goods ahead of the Christmas shopping season.

Factory output barely increased in September, increasing only 0.05% from August. This is down from the 7.3% growth recorded in the first nine months of the year.

Private sector forecasters have slashed their growth prospects this year for China, even though they still expect around 8%, which would be among the strongest in the world. The official target of the ruling Communist Party is “over 6%”, which leaves Beijing free to keep its controls in place.

The near-term outlook “remains difficult,” Rajiv Biswas of IHS Market said in a report. Real estate also suffers from “fears of contagion to certain other real estate developers”.

This year’s economic figures have been overstated due to the comparison to 2020, when factories and stores were closed to fight the coronavirus.

Production rose a record 18.3% in the first quarter of 2021, but forecasters said the rebound was already leveling off.

In September, growth in retail spending weakened to 4.4% year-on-year, from 16.4% in the first nine months.

Investment in real estate, factories, housing and other fixed assets rose 0.17% in September, from 7.3% in the first nine months.

The latest figures indicate that “the fallout from the real estate sector will be a major drag on growth in the coming quarters,” Fidelity’s Mo said. . “

Auto sales in the world’s largest industry market fell 16.5% in September from a year earlier, according to the China Association of Automobile Manufacturers. The group said production was disrupted by processor chip shortages.

Imports, an indicator of China’s domestic demand, rose 17.6% in September from a year earlier, but that was about half of the 33% growth in the previous month.

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National Bureau of Statistics (in Chinese): www.stats.gov.cn

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