Lowest in a year… below expectations
Real estate market contraction expected to continue
A ‘3% growth’ forecast in the fourth quarter
A worker works at a truck engine plant in Hangzhou, China on the 18th. Hangzhou | AFP Yonhap News
China’s economic growth fell below 5% in the third quarter of this year, the slowest in a year. It is analyzed that this is due to the disappearance of the base effect from the spread of Corona 19 last year, and several adverse factors such as power shortages, rising raw material prices, contraction in the real estate market, and lockdown measures due to sporadic COVID-19 outbreaks. As the economic slowdown continues in the second half of the year, the overall economic growth rate this year is expected to be lower than initially expected.
China’s National Bureau of Statistics announced on the 18th that China’s gross domestic product (GDP) increased by 4.9% in the third quarter compared to the same period last year. This is the same number as the growth rate in the third quarter of last year, when the Chinese economy did not fully recover from the shock of the spread of COVID-19. The economic growth rate so far recorded a growth rate of 6.5% in the fourth quarter of last year, and the growth rate in the first quarter of this year reached an all-time high of 18.3% thanks to the base effect of negative growth during the same period last year. After that, as the base effect gradually disappeared, the growth rate slowed significantly to 7.9% in the second quarter and then fell below 5% in the third quarter.
As the economic growth rate fell to -6.8% in the first quarter of last year due to the shock of the spread of COVID-19, it has been expected to some extent that it will record a high growth rate in the first half of this year, but that the growth rate will slow toward the second half of the year. However, the third-quarter growth rate announced today fell short of market expectations. Earlier, Reuters and Bloomberg forecasted China’s economic growth rate of 5.2% and 5.0% in the third quarter, respectively.
According to Reuters, “The real estate market instability caused by Hengda Group’s debt, supply chain disruptions, and severe electricity shortages have hit the world’s second largest economy.” “The economic growth rate in the third quarter was negatively affected by power shortages, rising raw material prices and the outbreak of COVID-19 in some regions,” said Wu Chaoming, chief economist at Chaixin Securities.
The problem is that this trend could continue in the fourth quarter, lowering the overall growth rate this year. This is because the electricity shortage and contraction in the real estate market, which are pointed out as the main reasons for the slowdown in the growth rate, are expected to continue for the time being. Some predict that China’s economic growth in the fourth quarter will slow to 3-4%. Considering this situation, US investment bank Goldman Sachs has already lowered its economic growth forecast for China this year from 8.2% to 7.8%, and Japan’s Nomura Securities also revised its previous forecast from 8.2% to 7.7%. “The domestic economic recovery remains unstable and uneven,” said Fu Linghui, spokesman for China’s National Bureau of Statistics.
However, since the Chinese government has set its economic growth target for this year rather conservatively at 6% or more, it is expected to achieve it easily. The overall economic growth rate through the third quarter was 9.8% compared to the same period last year.
Premier Li Keqiang recently said, “This year, China’s economy is stable, and major macroeconomic indicators are in a reasonable range. The Chinese economy can achieve its annual target.”