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18 Oct 2021

International Economy

China’s economic growth falls to 4.9% YoY in 3Q21... energy crisis still poses a risk in the final quarter of 2021 (Business Brief No.3953)


China's economy in 3Q21 faced a wide range of economic issues, whereas China's stimulus packages remain rather limited. As a result, the country's economic growth in 3Q21 slowed to 4.9 percent YoY, following year-on-year growth of 18.3 percent in 1Q21 and 7.9 percent in 2Q21. Details are as follows:

  • China's manufacturing sector was pressured by rising manufacturing costs and an energy shortage. The Producer Price Index (PPI), which measures the ex-factory price of industrial products, remains high, growing within the range of 9.0 to 10.7 percent YoY in 3Q21, owing to the surging prices of commodities such as coal, iron and chemicals.
  • China's services sector was greatly affected by lockdowns to prevent further spread of COVID-19, after authorities reported the emergence of COVID-19 Delta variant cases in mid-July 2021 – which was first detected in Jiangsu province before spreading to 31 other provinces. The Chinese government implemented stringent COVID-19 prevention measures under the 'zero-COVID' policy amid the lockdowns. These restrictions had far-reaching impacts on China's services sector.
  • China's fixed asset investment shows signs of a slowdown, particularly in the property sector which was affected by both state measures and market pressures. While investment in fixed assets  has grown 7.3 percent YTD and YoY, economic anxiety has started to build, following news of a debt default by a major Chinese real estate company. This may cause fixed asset investment to decelerate.
  • China's exports continue to grow in line with global economic recovery. During the first three quarters of 2021, exports grew 22.7 percent YoY and YTD, reaching CNY 15.55 trillion, while imports during the same period rose 22.6 percent YoY and YTD, reaching CNY 12.79 trillion. In the first three quarters of 2021, ASEAN countries remained China's top trading partner, followed by the European Union and the United States.

Looking towards the final quarter of 2021, the Chinese economy is expected to see slowing growth, due to the high base of last year and ongoing uncertainty – especially from the energy shortage which could drag on into this coming winter. Even though the Chinese government has consistently attempted to find alternative sources of energy to replace coal, the fossil fuel remains China's key energy source in electricity generation, accounting for 65 percent of all electricity produced. Close attention should be paid to the impact on China's manufacturing sector stemming from its high degree of connectedness to global supply chains. Disruptions in China's supply chains could thus profoundly affect global supply chains.


KResearch has revised downward China's 2021 economic growth forecast to a range of 7.5 to 8.0 percent YoY, based on risks related to the energy crisis which may intensify during the winter and have sweeping effects on both the manufacturing and services sectors. Alongside existing issues like the debt default of a large property developer, risks stemming from the unresolved trade war with the United States, and additional measures implemented by the Chinese government to control business operations, the overall property sector and investment atmosphere in China could suffer more setbacks. Nevertheless, KResearch is of the opinion that the Chinese government will be able to maintain its economic growth for 2021 within the target of not less than 6.0 percent YoY.​

International Economy