China’s economic growth weakens; Asian shares slide Monday

·2 min read

CHINA’s economic growth is sinking under pressure from a construction slowdown and power shortages, prompting warnings about a possible shock to its trading partners and global financial markets.

The world’s second-largest economy grew by a weaker-than-expected 4.9 percent over a year ago in the three months ending in September, down from the previous quarter’s 7.9 percent, government data showed Monday, October 18, 2021.

Factory output, retail sales and investment in construction and other fixed assets all weakened.

Manufacturing has been hampered by official curbs on energy use and shortages of processor chips and other components due to the coronavirus pandemic. Construction, an industry that supports millions of jobs, is slowing as regulators force developers to cut reliance on debt that Chinese leaders worry is dangerously high.

“Ripple effects to the rest of the world could be significant” due to weaker Chinese demand for raw materials, said Mo Ji of Fidelity International in a report. “Even developed markets, including the U.S., would not be immune to a significant tightening in global financial conditions as a result of a negative China growth shock accompanied by financial stress.”

Compared with the previous quarter, the way other major economies are measured, output barely grew in the July-September period, expanding by just 0.2 percent. That was down from 1.2 percent in the April-June period and one of the past decade’s weakest quarters.

The slowdown adds to pressure on Beijing to prop up activity by easing borrowing controls and spending more on building public works. But forecasters said even if that happens, activity will weaken before policy changes take effect.

“Growth will slow further,” Louis Kuijs of Oxford Economics said in a report.

Chinese leaders are trying to steer the economy to more sustainable growth based on domestic consumption instead of exports and investment and to reduce financial risk.

Equity market

Meanwhile, Asian shares were mostly lower on Monday after China reported its economy grew at a meager 4.9 percent annual pace in July-September.

The Shanghai Composite index lost 0.4 percent to 3,559.96 while the Hang Seng in Hong Kong declined 0.4 percent to 25,246.38.

“The growth outlook has weakened due to the various headwinds,” Tommy Wu and Louis Kuijs of Oxford Economics said in a report. They forecast that growth would “slow significantly” in the current quarter.

Other regional shares also fell. Tokyo’s Nikkei 225 index edged 0.2 percent lower, to 29,013.29. Shares also slipped in Taiwan and Singapore, while in Seoul, the Kospi was flat, at 3,014.44. (AP with KOC)

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