China’s economy slows due to power shortage, supply disruptions, Covid-19

Latest government data shows China’s economy grew at less than 5% in the third quarter of this year as it faces multiple woes: power shortage, global supply chain disruptions, and Covid-19 outbreaks
Commercial office buildings under construction in Tongzhou, outskirts of Beijing, China. China’s economy is losing steam as a result of multiple woes, including power shortages and fresh Covid-19 outbreaks. (AP)
Commercial office buildings under construction in Tongzhou, outskirts of Beijing, China. China’s economy is losing steam as a result of multiple woes, including power shortages and fresh Covid-19 outbreaks. (AP)
Published on Oct 18, 2021 12:59 PM IST
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BySutirtho Patranobis

China’s economy grew at just 4.9% in the third quarter of 2021 - the slowest growth this year - as it scrambles against a crippling power shortage, disruptions in the global supply chain, and sporadic Covid-19 outbreaks, data from the national bureau of statistics (NBS) showed on Monday.

Rising commodity prices and restrictions on the real estate market are adding to woes for the second largest economy in the world.

The slowdown is adding pressure on the policy makers of the Communist Party of China (CPC) to help recover economic growth. China’s economy had seen a remarkable recovery in the first quarter of the year after successfully controlling the Covid-19 pandemic.

The slump that China’s economy is going through is telling. In the third quarter (Q3), the country’s GDP grew 4.9% year-on-year, slower than the growth of 18.3% in Q1 and 7.9% in Q2, NBS statistics showed.

The country’s GDP expanded 9.8% year-on-year in the first three quarters, putting the average growth for the period in the past two years at 5.2%, according to the NBS data.

Experts told Chinese official media that China’s GDP growth in the fourth quarter will face extra pressure, which may further drag down GDP growth for the whole of 2021.

“The domestic economic recovery is still unstable and uneven,” NBS spokesperson Fu Linghui said in Beijing on Monday. “Since entering the third quarter, domestic and overseas risks and challenges have increased.”

In September, China was hit by its worst power crisis in recent years.

“Surging electricity demand in a rebounding economy, plunging coal supplies and Beijing’s climate change policies create a perfect storm disrupting global supply chains,” the business website Caixin reported.

Spokesperson Fu remained optimistic about tackling the power shortage. The power crisis had a “certain impact” on normal production, Fu said, but he added that the impact on China’s economy “is controllable”.

Rising energy prices globally as well as tight domestic supplies of coal and electricity partly led to power outages in some regions that affected normal production orders, Fu was quoted as saying by the Xinhua news agency.

China has rolled out a series of measures to ensure power supply and keep electricity prices stable, he said, adding that as these measures gradually take effect, the power crunch would be eased and its impact on economic operation will be alleviated.

“Global worries about a possible spillover of credit risk from China’s property sector into the wider economy have also intensified as major developer China Evergrande Group wrestles with more than $300 billion of debt,” Reuters reported on Monday.

On Sunday, it was widely reported that as winter approaches, Chinese authorities fear what is being called a “twindemic” - a likely combined increase in Covid-19 outbreaks and influenza cases across the country.

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Sunday, November 28, 2021