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China's GDP disappoints, Q3 progress slows to four.9%

Aerial view of coal being unloaded from a cargo ship at Lianyungang Port in Lianyungang, Jiangsu Province, China on Oct 14, 2021.

Wang Jianmin | Visual China Group | Getty Images

BEIJING – China's GDP grew a disappointing 4.9% in the third quarter as industrial activity rose less than expected in September.

The National Bureau of Statistics said Monday that gross domestic product rose 4.9% year over year in the third quarter. According to analysts polled by Reuters, this fell short of expectations for an expansion of 5.2%.

Industrial production rose 3.1% in September, below the 4.5% expected by Reuters.

"Since the beginning of the third quarter, domestic and international risks and challenges have increased," said Fu Linghui, spokesman for the National Bureau of Statistics, at a press conference Monday in Mandarin, according to a CNBC translation.

The electricity shortage has "certain effects" on normal production, Fu said, but added that the economic effects are "controllable".

Many factories had to stop production at the end of September as a rise in coal prices and a power shortage prompted local authorities to abruptly cut off electricity. The central government has since emphasized that it will boost the coal supply and ensure the availability of electricity.

Monday's data release also showed that companies were less interested in investing money in future projects.

Real estate worries

Investments in property, plant and equipment were weaker than expected in the first three quarters of the year, according to data from the National Bureau of Statistics. It was a 7.3% increase over the previous year versus the expected 7.9%.

"Investment activity has been subdued due to tight credit conditions," said Chaoping Zhu, global market strategist at J.P. Morgan Asset Management.

Zhu estimated that investments in property, plant and equipment were down 2.5% year over year in September, mainly due to a 3.5% decrease in real estate investments.

Moody & # 39; s estimates that real estate and related industries account for about a quarter of China's GDP. Over the past 18 months, Beijing has stepped up efforts to reduce developers' reliance on debt.

Giant developer Evergrande's struggles came to the fore in August when the company warned of a default and subsequently missed payments to investors on its dollar-denominated offshore debt. The Chinese central bank said on Friday that Evergrande was a unique case and that most of the developers had stable operations.

On Monday, the Bureau of Statistics Fu noted that the real estate sector's contribution to the economy slowed in the third quarter.

However, he claimed the impact on overall growth was limited.

The latest data showed that consumer spending stagnated despite patchy coronavirus-related restrictions and a fourth straight monthly decline in auto sales.

Retail sales exceeded expectations, increasing 4.4% year over year in September. The Reuters poll had predicted growth of 3.3%.

The urban unemployment rate was 4.9% in September. However, the proportion of 16 to 24 year olds remained significantly higher at 14.6%.

China's growth prospects

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"On the regulatory side, we believe the authorities will better manage the pace and intensity of the regulatory campaign to meet the key economic and social development goals set for this year and the next 5-10 years," he said. "In our opinion, officials can better communicate with the market about the motives behind the regulatory push and telegraph future regulatory hotspots."

– CNBC's Yen Nee Lee contributed to this report.

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