China: Growth outlook has mitigated for Q4 2021 – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest set of data releases in the Chinese economy.

Key Takeaways

“China’s official manufacturing Purchasing Manager’s Indexes (PMI) slipped into a contraction for the first time since February 2020 when the country was first hit with the COVID-19 outbreak, impacted by the widespread power shortage.”

“Meanwhile, the official non-manufacturing PMI rebounded back into the expansion territory in September, supported by higher consumption during the Mid-Autumn holiday.”

“Overall, China’s growth outlook has weakened going into 4Q21 given factors including: 1) power shortages that will hit its key growth engine – exports; 2) debt crisis at property giant Evergrande that could weigh on real estate investment demand and may have spillover impact into banking, construction materials and private consumption; 3) uncertainties posed by the more contagious COVID-19 Delta variant that could continue to drag on consumption. We will reassess our 2021 growth forecast which is currently at 8.6% following the 3Q21 GDP release on 18 October.”