China’s economy grew more slowly than expected in the third quarter. Gross domestic product (GDP) expanded 4.9% in the July-September quarter from a year earlier, the national statistics bureau said today, October 18. That’s a big drop from the 7.9% year over year growth in April-June. Economists had projected growth of 5.2% for the quarter.
A big question is where China’s economy goes from here. The official view, stated by the governor of the People’s Bank is the country is “doing well.” Independent economists begged to differ. Thanks to power outages, supply bottlenecks, outbreaks of Covid, and struggles in the property sector, these economists worry about a deeper downturn and a further drop in growth in 2022 to the lowest rate in more than a decade.
The “worried” view gets support if you look at the quarter to quarter (and not the year over year) trend. Growth was just 0.2% between July-September down from 1.2% in the second quarter. This is the weakest recorded since quarterly figures were first published in 2010.
Julian Evans-Pritchard, senior China economist at Capital Economics, told Reuters that his company’s “activity proxy” measure now points to a “sharp contraction” in GDP. “Although some of the recent weakness in services is now reversing, industry and construction appear on the cusp of a deeper downturn. For now, the blow from the deepening property downturn is being softened by very strong exports. But over the coming year, foreign demand is likely to drop back as global consumption patterns normalise coming out of the pandemic and backlogs of orders are gradually cleared. All told, we expect growth of just 3% on our China activity proxy next year, the slowest pace since the global financial crisis.”
On the other hand, Yi Gang, head of the People’s Bank told a Group of 30 international banking seminar that China’s economy was expected to grow 8% this year.
Today the Shanghai Composite slipped 0.12% and the CSI 300, an index of 300 A shares traded in Shanghai and Shenzhen, dropped 1.16%.
