China Economic Growth Weakens 10/18 06:42

   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.

   BEIJING (AP) -- 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% over 
a year ago in the three months ending in September, down from the previous 
quarter's 7.9%, government data showed Monday. 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%. That was down from 1.2% 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.

   Construction and housing sales, an important source of demand for steel, 
copper and other industrial imports, have slowed since regulators ordered 
developers to reduce their debt levels.

   One of the biggest, Evergrande Group, is struggling to avoid defaulting on 
$310 billion owed to banks and bondholders. That has fueled fears about other 
developers, though economists say the threat to global financial markets is 
small.

   Factories in some provinces were ordered to shut down in mid-September to 
avoid exceeding official goals for energy use and energy intensity, or the 
amount used per unit of output. Some warned deliveries of goods might be 
delayed, raising the possibility of shortages of smartphones and other consumer 
products ahead of the Christmas shopping season.

   Factory output barely grew in September, expanding by only 0.05% compared 
with August. That was down from the 7.3% growth for the first nine months of 
the year.

   Private sector forecasters have cut their growth outlook this year for 
China, though they still expect about 8%, which would be among the world's 
strongest. The ruling Communist Party's official target is "more than 6%," 
which leaves Beijing room to keep its controls in place.

   The near-term outlook "remains difficult," said Rajiv Biswas of IHS Market 
in a report. Real estate also is suffering from "fears of contagion to some 
other property developers."

   This year's economic figures have been exaggerated due to comparison with 
2020, when factories and stores were closed to fight the coronavirus.

   Output grew by a record 18.3% in the first quarter of 2021, but forecasters 
said the rebound already was leveling off.

   In September, growth in retail spending weakened to 4.4% over a year 
earlier, down from 16.4% in the first nine months.

   Investment in real estate, factories, housing and other fixed assets rose 
0.17% in September, down from 7.3% for the first nine months.

   The latest figures indicate "the property sector fallout will be a 
significant drag on growth in the coming quarters," said Fidelity's Mo. "Even 
significant policy easing now, which is still unlikely in our view, will take 
time to propagate into the real economy."

   Auto sales in the global industry's biggest market fell 16.5% in September 
from a year earlier, according to the China Association of Automobile 
Manufacturers. The group said production was disrupted by shortages of 
processor chips.

   Imports, an indicator of Chinese domestic demand, rose 17.6% in September 
over a year earlier, but that was about half the previous month's 33% growth.