China's third-quarter economic growth numbers slowed more than expected to 4.9% from the same period last year, falling short of the 5.2% forecasted by a Reuters poll, but the growth has not yet bottomed, said economists.
Registering the slowest growth in a year, the sharp slowdown from 7.9% in the previous quarter took many people by surprise as the economy continued to rebound from the trough after stepping out of the shadow of the COVID-19 pandemic.
"All the forecasts (by research institutes) on the economic growth of China this year and next appear to be over-optimistic," said Kuo-yuan Liang, chairman of Yuanta-Polaris Research Institute, a senior economist and honorary professor of Tsing-hua University in Taiwan.
Due to the fact that manufacturers are busy churning out products for Thanksgiving and Christmas, Liang said whether the fourth quarter will see further slowdown depends on whether factories in China can overcome the challenges and manage to fulfill demand. "But 2022 will be even tougher, as the base period is quite high in the first half of 2021."
Despite the fact that more than a dozen new semiconductor fabs are being built in many parts of the world, he expects chip crunch will last through 2022 and perhaps to 2023 because it takes at least three years to build a fab.
Liang said China is increasing government intervention for the purpose of mitigating the wealth gap and decreasing its dependence on the external environment due to a return to socialist ideology and selective de-coupling from the US. "Policy maneuver to contain risk from multiple fronts is a highly complicated task," said Liang.
In his report issued in September, Liang had warned that a lower-than-expected economic growth in China is a potential risk to the global economy. The chip crunch and the power shortage have dragged the China Purchasing Manager Index (PMI) of the manufacturing industry below 50 in September, signaling that the economy is struggling to continue expanding.
Meanwhile, Evergrande, a major real-estate developer in China, is already having difficulties repaying its hefty debt. Although Beijing has repeatedly assured that the risks the Evergrande crisis poses are "controllable," economists warned the possibility of contagion, if Evergrande fails to pay the interest after the grace period.
If the authorities continue the current policy measures including aggressive decarbonization, property curbs, zero tolerance in COVID control, and regulatory clampdown, The Australian and New Zealand Banking Group (ANZ) economists predicted that China's Q4 GDP growth may slow further to 0.2% q/q seasonally adjusted or 2.7% year-on-year in the worst scenario.
Just last week, Raghuram Rajan, former chief economist at the International Monetary Fund (IMF) said during a CNBC interview that he is worried about China's multiple crackdowns on technology, private tutoring, and real-estate all at the same time is risking making big mistakes, "Because to some extent they're attacking the basis of their growth so far."
Bloomberg report said there is no trace that Beijing is in any hurry to change the current policies by pumping stimulus to revert the slowdown because the growth target for 2021 is set at 6%. People's Bank of China Governor Yi Gang was quoted as saying that growth momentum has "moderated somewhat" but forecast the economy would expand about 8% this year.
"Watch out for spill-overs of China's economic slowdown if growth rate fell below 4%," Liang said. "It will be quite painful at least in the short-run because it takes time to adjust the economic pattern to suit the reform."
The official press release of China's National Bureau of Statistics (NBS) chose to focus more on the 9.8% year-on-year growth in the first 9 months, saying that the economy is facing "dire environment domestic and abroad," but has continued to grow, and all macroeconomic indices stay in reasonable ranges, while employment, income levels, and international payments remain stable and balanced.
