The fears have been confirmed. The Evergrande crisis (a reflection of the real estate situation), the Delta variant and the energy crunch are taking a toll on China’s economic growth. The economy has gone from growing almost 9% annually in the second quarter of the year to growing less than 5% in the last quarter.

Growth has been below that forecast by the Bloomberg consensus that predicted an advance in GDP of around 5.2%. In quarterly terms (growth over the previous quarter), the economy has only advanced 0.2% , compared to the 0.5% expected by analysts. In this way, the country’s growth falls below the trend that had been marking the years prior to the covid.

The worst forecasts for China are confirmed
Commerzbank economists highlight in a comment sent to clients that “clearly, the resurgence of the virus and the energy crisis have weighed on the economic activities of the country. In addition, concerns about the real estate sector (with Evergrande as the epicenter) have also affected the sentiment and relevant investment “, explain the German bank experts.

The ‘Asian giant’ has started a change in the economic model that seeks sustainability in the long term, but which will have a visible cost (in terms of growth) in the short term, as can be seen.

Beijing is grappling with an unprecedented energy crisis stemming from cutting emissions to reduce pollution, but which has also been exacerbated by the global coal and gas price boom. Several provinces of the country are rationing energy consumption, affecting the production of various industries and, therefore, economic activity as a whole.

At the same time, Beijing is laying the foundations that will lead to a new economic model less dependent on debt and brick. These changes will undoubtedly have significant implications for China and the rest of the world.

“Going forward, policymakers will seek a new balance between economic growth and financial stability . So while the overall tone is likely to remain tough on borrowing, one can still expect a some marginal relaxation to counteract the strong headwinds for the economy. Conclusion, the slowdown in growth should continue in the coming quarters “, say the experts of the German bank.

The weakening is widespread

Regarding the activity data for September, industrial production advanced 3.1% annually (consensus: 3.8%), compared to 5.3% the previous month, reflecting the damage caused by energy shortages . Fixed asset investment slowed significantly to 7.3% year-on-year in the first three quarters of this year, from a previous reading of 8.9%.

On the other hand, although retail sales obtained better results than expected with 4.4% per year (consensus: 3.5%), the trend has clearly lost strength, which indicates that domestic consumption is also moderating, as well. as well as household spending.

However, from Commerzbank they acknowledge that “surprisingly, the urban unemployment rate fell below 5% at the end of September, to 4.9% (consensus: 5.1%). However, we must interpret it with caution, since that the data could have very short legs and the age group of 16 to 24 years registered an unemployment rate of 14.6% “.

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