Current Affairs

Issue

The industrial output of China grew lesser than expected, resulting in slowing down its GDP growth rate to 4.9% in the third quarter.

 

Background

China has been witnessing an economic slowdown owing to various reasons. The major reason has been financial crisis in its real estate sector.

 

Details

• The industrial production was expected to rise by 4-4.5% in September but it could manage to grow only by 3.1%.

• One reason could be the stable base from previous year as China had managed to record higher growth after recovering from pandemic.

• The major reason could be systemic issues in its economy. It includes a massive fuel crunch, which has crippled Chinese industry.

• The other could be the crisis in real estate sector fuelled by the Evergrande fiasco. In addition, souring of business sentiment due to federal crackdown has also played a part.

 

Indications from the data

• The marquee companies fuelling growth in China were less interested in investing in new projects.

• The fuel crisis has crippled production of many power based companies such as automobiles. The coal shortage is also very prominent.

• Factories in China’s industrial heartland had to curtail output in late September as non-availability of coal caused a major crisis.

 

Implications

• The output decreased drastically also due to non-availability of electricity. This was after the country witnessed shortage of fuel for electricity production.

• The fixed asset investment came in lower than expected due to failure in real estate sector of the country. Many infrastructure projects have been scrapped.

 

Impact on India

• China is India’s principal trading partner. The bilateral trade has grown by 50 per cent in the first nine months of 2021.

• Imports from China grew to $68.5 billion in the first nine months of 2021. India’s trade deficit with China has grown to $46.55 billion during this period.

• India’s trade with China is expected to cross $100 billion by the end of the year. India is still dependent on China for products such as fertilizers, electronic equipments, API, chemicals, telecom equipments and automobile parts.