New Delhi: China’s economy grew by 4.9% year-on-year in the third quarter of 2021, down from 6.3% in the same period last year, as the country faced headwinds from subdued global demand, deflationary pressures and an ailing property sector. The growth figure was slightly higher than the average forecast of 4.4% by economists but lower than the 5% target set by Beijing for this year.
On a quarterly basis, China’s economy expanded by 1.3% in the July-September period, up from 0.8% in the previous three months, indicating some resilience in the domestic recovery. However, the outlook remains uncertain as China grapples with the fallout of the debt crisis at Evergrande, the country’s largest property developer, which has sparked fears of contagion in the financial system and the broader economy.
China’s government has taken various policy measures to support growth in recent months, including increasing infrastructure spending, cutting interest rates, and easing restrictions on home buying in some cities to revive the real estate sector, which accounts for about a quarter of GDP. However, these efforts have been partly offset by the impact of sporadic COVID-19 outbreaks, supply chain disruptions, and environmental regulations that have curbed industrial activity.
China’s industrial production rose by 4.5% year-on-year in September, beating expectations of 3.8%, but still slower than the 5.3% growth in August. Retail sales, a key indicator of consumer spending, increased by 5.5% year-on-year in September, also exceeding forecasts of 4.7%, but lower than the 7.1% growth in August. China’s urban unemployment rate dropped to 5% in September from 5.2% in August, reflecting an improvement in the labor market.
China’s inflation remained subdued in September, with the consumer price index unchanged from a year ago, compared to a 0.8% increase in August. The producer price index, which measures the cost of goods at the factory gate, fell by 2.1% year-on-year in September, narrowing from a 2.5% decline in August.
China’s exports declined by 3.1% year-on-year in September, less than expected, while imports fell by 3.2%, slightly worse than expected. The trade surplus widened to $66.8 billion from $58.3 billion in August.
China is expected to face more challenges in the fourth quarter as it confronts the risks posed by Evergrande and other highly indebted property developers, as well as the potential spillover effects from the energy crisis and the slowdown in major trading partners such as the United States and Europe.
Analysts have lowered their growth forecasts for China for this year and next year, citing the uncertainty and volatility in the economy. The World Bank recently cut its projection for China’s GDP growth to 4.9% for 2021 and 5.1% for 2022, down from 5.1% and 5.4%, respectively. The International Monetary Fund also revised its estimate for China’s growth to 5% for this year and 5.6% for next year, from 5.6% and 5.9%, respectively.