Asian markets weighed down by disappointing Chinese GDP

Region’s largest economy struggles with energy crisis and looming Evergrande default

Asian stocks enjoyed a mixed start to the week, weighed down in part by China’s disappointing third-quarter gross domestic product data

The region’s largest economy grew by 4.9% year-on-year in the three months to the end of September, according to the National Bureau of Statistics (NBS). 

This constituted a decline from the 7.9% growth witnessed in the second quarter and came in under the 5% growth expected by analysts. On a quarter-on-quarter basis, the Chinese economy grew by only 0.2%. 

Industrial production and fixed investment growth both underwhelmed. Instead of the 3.8% and 7.8% expansion respectively expected, these fields grew by 3.1% and 7.3% year-on-year. 

On the other hand, the nation’s retail sales rose by 4.4%, which was 0.9% more than had been expected.

Pressures on the Chinese economy

A slowing of China’s post-Covid economic expansion cannot be said to have come as a surprise. 

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Like the United States, the nation has been gripped by runaway levels of inflation above the official target of its central bank. Last week saw the publication of data finding that China’s Produce Price Index rose to its highest level in 26 years in September, while consumer prices rose for their seventh consecutive month. 

An energy production crisis, triggered in part by the cost of coal and natural gas rising to record highs but also by Beijing’s new environmental regulations, has further weakened economic activity. 

Evergrande concerns

The Chinese stock market also remains anxious as to the fate of Evergrande Group. Should it fail to settle the interest payments owed on a dollar-denominated bond by 23 October, the world’s most indebted property developer will default. 

Despite substantial liquidity injections into the market from the People’s Bank of China,  opinion remains split as to the scale of the possible knock-on effect a default could have on economic sentiment within China. 

At Monday’s close, the Shanghai Composite Index closed down by 0.1%, while Hong Kong’s Hang Seng Index stood 0.3% higher. Japan’s Nikkei 225 traded 0.1% lower, while the Korea Composite Stock Price Index (KOSPI) traded down by 0.28%. 

Further reading: China sees an unexpected growth in trade

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