Steel mills have faced power cuts. Computer chip shortages have slowed car production. Troubled property companies have purchased less construction material. Floods have disrupted business in north-central China.
It has all taken a toll on China’s economy, an essential engine for global growth.
The National Bureau of Statistics announced on Monday that China’s economy increased by 4.9 percent in the third quarter, compared to the same period last year; the period was markedly slower than the 7.9 percent increase the country notched in the previous quarter. Industrial output, the mainstay of China’s growth, faltered badly, especially in September, posting its worst performance since the early days of the pandemic.
Two bright spots prevented the economy from stalling. Exports remained strong. And families, particularly prosperous ones, resumed spending money on restaurant meals and other services in September, as China succeeded once again in quelling small outbreaks of the coronavirus. Retail sales were up 4.4 percent in September from a year ago.
Chinese officials are showing signs of concern, although they have refrained so far from unleashing a big economic stimulus.
The government’s own efforts, though, are part of the current economic challenges.
In recent months, the government has unleashed a raft of measures to address income inequality and tame businesses, in part with the goal of protecting the health of the economy. But those efforts, including penalizing tech companies and discouraging real estate speculation, have also weighed on growth in the current quarter.
The government had also imposed limits on energy use as a part of a broader response to climate change concerns. Now, the power shortages are hurting industry, and the country is rushing to burn more coal.
“The economy is sluggish,” said Yang Qingjun, the owner of a corner grocery store in an aging industrial neighborhood of shoe factories in Dongguan, near Hong Kong. Power cuts have prompted nearby factories to reduce operations and eliminate overtime pay. Local workers are living more frugally.
“Money is hard to earn,” Mr. Yang said.
Trying to Solve the Real Estate Question
Urbanization was once a great engine of growth for China. The country built spacious apartments in modern high-rises for hundreds of millions of people, with China producing as much steel and cement as the rest of the world output combined, if not more.
Now, real estate — in particular, the debt that developers and home buyers amassed — is a major threat to growth. The country’s biggest developer, China Evergrande Group, faces a serious cash shortage that is already rippling through the economy.
Construction has ground to a halt at some of the company’s 800 projects as suppliers wait to be paid. Several smaller developers have had to scramble to meet bond payments.
This could create a vicious cycle for the housing market. The worry is that developers may dump large numbers of unsold apartments on the market, keeping home buyers away as they watch to see how far prices may fall.
“Some developers have encountered certain difficulties, which may further affect the mood and confidence of buyers, causing everyone to postpone buying a house,” said Ning Zhang, a senior economist at UBS.
The fate of Evergrande has broader import for the long-term health of the economy.
Officials want to send a message that bond buyers and other investors should be more wary about lending money to debt-laden companies like Evergrande and that they should not assume that the government will always be there to bail them out. But the authorities also need to make sure that suppliers, builders, home buyers and other groups are not badly burned financially.
These groups “will get made more whole than the bondholders, that’s for sure,” predicted David Yu, a finance professor at the Shanghai campus of New York University.