China’s economy slows as energy crisis and real estate issues kick in

Economists have warned that the slowdown is expected to deepen in the last three months of 2021 as China is rocked by power rationing and problems in the housing market. Industrial production growth stammered in September amid the power outages, from 5.3% year-on-year in August to 3.1%.

Craig Botham, Chinese economist at Pantheon Macroeconomics, said the slowdown in quarterly data “reflects headwinds that have occurred” in recent months.

He said, “Widespread plant closures have more than halved the growth rate of manufacturing, from 5.5% to 2.4%. Energy-intensive industries have suffered particularly.

Beijing is rationing electricity from manufacturers and ordering coal suppliers to increase production ahead of winter demand spikes. Coal prices in China have reached record highs as a cold snap deepens concerns about the energy crisis.

Tao Wang, an economist at UBS, warned that “power shortages and production cuts are likely to continue to constrain growth in the fourth quarter, even if recent policy responses ease the constraints.”

She added: “Covid-related restrictions could hamper the resumption of consumption over the coming winter season as new cases emerge and in preparation for the holidays and the Winter Olympics.”

Barclays analysts, meanwhile, cut their fourth-quarter forecast by 1.2 percentage points to 3.5 percent.

The data came after China’s central bank governor Yi Gang insisted the economy “was doing well” on Sunday despite mounting pressure on Beijing on several fronts.

He said: “Economic growth has slowed down a bit, but the trajectory of the economic recovery remains unchanged.”

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