China has marked 4.9% of economic growth in July to September quarter from a year earlier. It is the slowest pace in a year and is worse than what the analysts have predicted. This way far slower form the previous quarter when the growth was 8%. It suggests that the recovery is weakening.
Issues like power shortage, covid outbreak, and pressure from Beijing to a huge number of industries are taking up the toll. These developments may further dampen the growth for the rest of the year. It must not be underestimated. The second-largest economy in the world has been facing several challenges in recent months.
When it comes to the power supply in China, the rising global commodity prices are affecting the raw material costs. It is coming at the same time as Beijing has already increased its pressure on the regional government to reduce their carbon emission.
Many provinces have implemented electricity relations. It is causing blackouts for homes and factories. Also, the largest coal-producing province of China is suffering from torrential flooding.
The heavy rains are leading to the coal price hitting fresh highs. The government is abandoning the production caps.
The power cuts are disrupting many industries, which are hampering the economic growth of the country.
“The numbers are much weaker than what we thought. I think in the fourth quarter; it will be even slower because we will see more impact from the energy crunch.”
On the other hand, China’s Central bank is downplaying the risk of contagion, which is breaking its silence on the crisis. Woei Chen ho, an economist at United Overseas Bank in Singapore, says that the energy crackdown on the property sector means that the bank will downgrade its growth forecast for China.
From big tech to gaming and education, several biggest companies are now facing policy carbs that are aiming at social transformation. The reforms are aiming at long-term growth; they are weighing on domestic consumption and investment, as Chaoping Zhu said.
“Short-term shocks seem inevitable when a variety of policy measures have been introduced in a short period since July,” he said.