World

China's economy stumbles on power crunch, property woes

Its third-quarter GDP grows 4.9 per cent, missing forecasts

BEIJING: China's economy hit its slowest pace of growth in a year in the third quarter, hurt by power shortages and wobbles in the property sector, highlighting the challenge facing policymakers as they seek to prop up a faltering recovery while reining in the real estate sector.

Gross domestic product expanded 4.9 per cent from a year ago, missing forecasts, as attempts by Beijing to curb lending to the property sector exacerbated the fallout from electricity shortages, which sent factory output back to levels last seen in early last year, when heavy Covid-19 curbs were in place.

The world's second-largest economy had staged an impressive rebound from last year's pandemic slump, but the recovery has lost steam from the blistering 18.3 per cent growth clocked in the first quarter.

Under President Xi Jinping, a drive to make structural changes that address long-term risks and distortions, which has involved crackdowns on the property sector and technology giants, as well as carbon emission cuts, has taken a toll.

Analysts at Barclays cut their fourth quarter forecast by 1.2 percentage points to 3.5 per cent on the disappointing data. Analysts at ANZ cut their forecast for China's 2021 GDP growth to 8 per cent from 8.3 per cent.

BALANCING ACT

Policymakers will now have to balance the impact of those structural changes with steps that will shield the economy and tame contagion risks from a debt crisis at major developer China Evergrande Group.

China has pledged to reduce inequality after years of breakneck growth but may have to tread cautiously to avoid derailing a private sector that has been a vital engine of growth and jobs, analysts say.

In an essay in the ruling Communist Party journal Qiushi last week, Mr Xi called for progress on a long-awaited property tax that could reduce wealth gaps.

New construction starts in September slumped for a sixth straight month, National Bureau of Statistics data showed, the longest spate of monthly declines since 2015, as cash-strapped developers reined in investment and paused projects following tighter borrowing limits.

Meanwhile, the industrial sector has been hit by power rationing triggered by coal shortages, as well as environmental curbs on heavy polluters such as steel plants and floods over the summer. Overall industrial output rose just 3.1 per cent last month from a year earlier, marking the slowest growth since March last year, during the first wave of the pandemic.

Premier Li Keqiang said last week that China has ample tools to cope with economic challenges despite slowing growth and expressed confidence in hitting full-year development goals. - REUTERS

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