China: 2021 GDP revised lower – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest GDP figures in the Chinese economy.

Key Takeaways

“China’s 3Q21 GDP growth slowed sharply to 4.9% (0.2% q/q SA) from 7.9% in 2Q21 and was marginally below consensus expectation (Bloomberg est: 5.0% y/y, 0.4% q/q SA; UOB est: 5.7% y/y, 0.9% q/q). The 3Q21 growth rate also matched the same period last year when the economy was recovering from the depth of its pandemic. Overall, the economy grew by 9.8% y/y in the first three quarters of 2021.”

“The September economic data that were released with the 3Q21 GDP showed that the energy crunch was having a larger than expected impact on industrial production while retail sales rebounded with the easing of COVID containment measures. The improvement in private consumption contributed to the recovery in labour market condition as the surveyed jobless rate fell to 4.9% in September from 5.1% in the two preceding months. Meanwhile, property investment continued to moderate as the funding stress at local property developers weighed.”

“The more challenging economic environment in 4Q21 including the energy crunch which is likely to worsen due to the colder weather, supply bottlenecks and the widening regulatory crackdown will further slow China’s growth. At the same time, China’s zero-COVID strategy and more contagious virus strains limit any potential upside surprise from private consumption. As such, we have revised down the outlook for China’s 4Q21 GDP growth to 3.5% with full-year GDP at 7.9% (from previous 2021 forecast of 8.6%).”