China’s energy crunch choked economic growth as factories switch off production amid shortages and soaring energy costs.
The world’s second largest economy grew 4.9 per cent in the last quarter compared to the same period last year, the slowest rate of expansion since the third quarter of last year.
Third quarter growth came in below analysts’ expectations.
The marked curbing in economic growth was driven by a poor performance in China’s industrial production sector.
A shortage of energy components has put upward pressure on prices for coal, prompting energy-intensive firms to curb production to minimise losses.
Price caps on power generators meant businesses were partly restricted from passing on higher input prices to consumers, acting as a disincentive to production.
Craig Botham, chief China+ economist at Pantheon Economics, said: “Widespread factory closures more than halved the growth rate of manufacturing, from 5.5 per cent to 2.4 per cent. Energy intensive industries particularly suffered.”
Soaring commodity prices resulted in factory gate prices rising at their fastest pace on record last month, climbing 10.7 per cent.
A clamping down on the highly leveraged real estate sector in the wake of the Evergrande crisis slowed growth in the sector.
Restrictions on credit availability stopped real estate firms from sourcing funding to progress projects.
China has not been immune to the severe chip shortages, according to Iris Pang, chief greater China economist at ING.
“Manufacturing was hit hard by supply chain disruption due to Covid as some port operations continued to be hit and chip shortages were will very much in evidence.”
Retail sales were a bright spot, climbing 4.4 per cent compared to last year, up from 2.5 per cent in August.
China’s economy is facing strong headwinds over the coming months that threaten to limit growth even further.
“The blow from the deepening property downturn is being softened by very strong exports. But over the coming year, foreign demand is likely to drop back as global consumption patterns normalise coming out of the pandemic and backlogs of orders are gradually cleared.” Julian Evans-Pritchard, senior China economist at Capital Economics, said.