The verdict of the National Statistics Office arrives, relentlessly: in the third quarter, Chinese growth lost three points compared to the previous quarter, going from +7.9 to 4.9, due to the slowdown in construction and limits on use of energy that weighed on the post-pandemic recovery. The impact on global chains will be inevitable. The central bank defines the Evergrande risk as controllable, but the future of the real estate giant at this point becomes crucial for the stability of the entire economy.
Predictable slowdown
China’s economic growth plummeted in the last quarter due to the slowdown in construction and limits on energy consumption that weighed on the recovery from the coronavirus pandemic.
Chinese government data show that the second world economy grew three points less + 4.9% compared to a year earlier in July-September, down from 7 on +, 9% in the previous quarter. Industrial production, retail sales, and investments in construction and other fixed assets all weakened. Construction, a sector that supports millions of jobs and which, including related industries, absorbs a quarter of GDP, has slowed down after state interventions to put a brake on credit in the sector. Production was hampered in late summer, in September, by power cuts imposed by some large provinces to align with directives to save energy and keep pollution at bay.
Construction, energy the main causes
The mix of elements underlying the slowdown is worrying about the possible effects on international trade and global financial markets. Industrial production was further held back by the semiconductor market and the resulting global shortage of chips. The triple squeeze on credit in construction presents the account with cascading effects not only on the internal system.
According to insiders, even advanced markets such as the United States would not be immune from a significant tightening of global financial conditions. The shock could also be negative on growth in the last quarter, alongside foreseeable financial stress.