The rate of growth from a year ago in the July-to-September period was much slower than the 7.9% year-on-year increase China registered in the second quarter. It's also the weakest rate of growth since the third quarter of 2020, when GDP also grew 4.9% year-on-year. The data from China's National Bureau of Statistics suggests that China's economy is hurting from a slew of challenges over the last few months.
The country is in the middle of an energy crunch that is denting factory output and leading to power cuts in some areas. That problem has been fueled by demand earlier this year for construction projects that need fossil fuel and are at odds with Beijing's pursuit of ambitious targets to cut carbon emissions. Some factories have reduced shifts because of power rationing. Coal prices are at record highs.
Mounting inventories and shipping delays have also hit smaller manufacturers in China that are now hurting for cash and forcing them to either cut production or lose orders. A debt crisis at embattled Chinese conglomerate Evergrande has also triggered worries about contagion risks to the giant property sector and the broader economy.
Property, together with related industries, accounts for as much as 30% of the country's GDP. A collapse of Evergrande could scare away investors and buyers at a time when property sales and construction activity are already slowing. A potential wave of defaults by developers could have a significant impact on growth and pose risks to financial stability. Still, authorities have sought to assuage fears about those problems affecting the economy.
The People's Bank of China said Friday that Evergrande had mismanaged its business but risks to the financial system were "controllable." The government on Monday used similar language to temper concerns about the energy crunch. Fu Linghui, the spokesperson for the National Bureau of Statistics, said that the "tight supply of energy is just a phase, and the impact on the economy is controllable."
Fu also pointed out that global energy prices have "risen sharply" since the start of the year, and warned that the supply of power and coal in China has been tight. Still, he said that the crunch would be "alleviated" as the government implemented measures to bring the problem under control. Earlier this month, for example, China ordered coal mines to ramp up production.
China is still on track to meet an annual growth target set by Beijing of more than 6%. For the first three quarters of 2021, GDP grew 9.8% from a year ago, when the Covid-19 pandemic was taking its biggest toll.
But authorities are still warning of concerns ahead. Fu noted that the economic recovery is "still unstable and uneven." "The challenges of keeping the economy running smoothly have increased," he added.