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China property, construction sectors contract for first time since pandemic hit

China‘s real estate and construction sectors shrank in the third quarter for the first time since the early stage of the pandemic, official data showed Tuesday, as they face increasing pressure from a sprawling crackdown on the country’s ailing property industry.

The figures come a day after figures showed the world’s second-biggest economy grew slower than forecast in the same period owing to the regulatory tightening as well as an energy crunch.

Real estate output shrank 1.6 percent on-year, the National Bureau of Statistics (NBS) said in a report breaking down changes in gross domestic product.

The reading marks the first contraction since the first three months of 2020 — when China’s Covid-19 outbreak was at its height — and a reverse from its 7.1 percent growth in April-June.

At the same time, output from construction slipped 1.8 percent, the report said, also representing its first decline since the first quarter of last year.

Before the pandemic, China’s construction sector had never shrunk since at least 1992 when data started being collected, according to data cited by Bloomberg News.

Property and construction are pillars of the Chinese economy, underpinning other important sectors such as commodities and furnishings.

But they have taken a hit as Beijing wages a regulatory clampdown on the real estate sector, including by tightening rules on lending.

The move comes against the backdrop of a $300 billion debt crisis at China Evergrande — one of the nation’s biggest property developers — that has hammered investor sentiment and fuelled fears of a spillover into the wider economy.

China’s central bank has said the risk of contagion is “controllable” and Evergrande will be able to resume unfinished projects.

Tuesday’s report also showed growth in China’s manufacturing output slowed to 4.6 percent in the third quarter, down from 9.2 percent in the previous three months, as production curbs at factories battling ongoing energy shortages began to bite.

At a news briefing Monday, NBS spokesman Fu Linghui said “current international environment uncertainties are mounting and the domestic economic recovery is still unstable and uneven”.

China property, construction sectors contract for first time since pandemic hit

China‘s real estate and construction sectors shrank in the third quarter for the first time since the early stage of the pandemic, official data showed Tuesday, as they face increasing pressure from a sprawling crackdown on the country’s ailing property industry.

The figures come a day after figures showed the world’s second-biggest economy grew slower than forecast in the same period owing to the regulatory tightening as well as an energy crunch.

Real estate output shrank 1.6 percent on-year, the National Bureau of Statistics (NBS) said in a report breaking down changes in gross domestic product.

The reading marks the first contraction since the first three months of 2020 — when China’s Covid-19 outbreak was at its height — and a reverse from its 7.1 percent growth in April-June.

At the same time, output from construction slipped 1.8 percent, the report said, also representing its first decline since the first quarter of last year.

Before the pandemic, China’s construction sector had never shrunk since at least 1992 when data started being collected, according to data cited by Bloomberg News.

Property and construction are pillars of the Chinese economy, underpinning other important sectors such as commodities and furnishings.

But they have taken a hit as Beijing wages a regulatory clampdown on the real estate sector, including by tightening rules on lending.

The move comes against the backdrop of a $300 billion debt crisis at China Evergrande — one of the nation’s biggest property developers — that has hammered investor sentiment and fuelled fears of a spillover into the wider economy.

China’s central bank has said the risk of contagion is “controllable” and Evergrande will be able to resume unfinished projects.

Tuesday’s report also showed growth in China’s manufacturing output slowed to 4.6 percent in the third quarter, down from 9.2 percent in the previous three months, as production curbs at factories battling ongoing energy shortages began to bite.

At a news briefing Monday, NBS spokesman Fu Linghui said “current international environment uncertainties are mounting and the domestic economic recovery is still unstable and uneven”.

China’s power woes may worsen as demand surges amid coal supply lag

China’s power woes look set to intensify as coal prices rose to a record on Monday following data showing supply of the fuel fell in September adding to concerns that domestic output may be unable to meet surging electric generation demand.

Shortages of domestic coal have driven fuel prices for Chinese power generators higher, causing the unprofitable companies to ration power to industrial users. That has forced some factories in the world’s largest economy to suspend production, disrupting global supply chains.

China, also the world’s biggest energy consumer, has enacted measures to increase the output of coal, which fuels nearly 60% of its power plants, but government data on Monday showed that those steps will take time even as power demand surges to meet post-COVID-19 industrial needs.

Coal output in China was 334.1 million tonnes last month, down from 335.24 million tonnes in August and 0.9% lower from a year earlier, data from the National Bureau of Statistics (NBS) data showed.

September output averaged 11.14 million tonnes a day, according to Reuters calculations based on the data.

The National Energy Administration (NEA) last week said current daily output has climbed to more than 11.2 million tonnes, underscoring the slow pace of bringing meaningful supplies to market.

“The Chinese government is losing the battle to control soaring coal prices,” said Alex Whitworth, head of Asia Pacific Power and Renewables Research at Wood Mackenzie. “Despite efforts to increase coal supply, output fell in September due to weather, safety and logistics challenges. Neither has China succeeded in reining in booming power demand”

The NEA also reported September electricity consumption rose 6.8% from a year earlier and is up 12.9% for the first nine months of the year.

The supply and demand mismatch helped push Chinese coal futures to another record on Monday. Coal for January delivery, the most actively traded contract, climbed by the upper trading limit of 11% on Monday to 1,829 yuan ($284.15) a tonne, signalling a belief in a persistent coal supply crunch.

Last week, China took a big step in power reform by allowing coal-fired power plants to pass on higher costs to some customers, with an aim to encourage power plants to generate more electricity and to ease their profitability pressures.

“Recent price liberalization for coal power utilities and industrial end-users is a signal that the government is not confident that it can control coal prices in the near future,” said Whitworth.

Government likely to consider subsidy on P&K fertiliser tomorrow

NEW DELHI: The government is likely to consider tomorrow a proposal to fix subsidy on non-urea phosphatic and potassic (P&K) fertilisers for 2013-14 fiscal.

Under the nutrient-based subsidy (NBS) regime introduced on April 1, 2010, maximum retail price of 22 varieties of P&K fertilisers have been freed. But, the government reimburses companies the difference in cost of selling the soil nutrients at lower price to farmers.

“Cabinet is likely to consider tomorrow fixing the new NBS rates for P&K fertiliser for this fiscal,” an official in the Fertiliser Ministry said.

The ministry is expected to reduce the subsidy on DAP by Rs 2,000 per tonne to Rs 12,350 a tonne and that on MoP by Rs 2,700 per tonne to Rs 11,700 a tonne for the 2013-14 fiscal, another official said.

In 2012-13 fiscal, the government fixed subsidy on DAP at Rs 14,350 per tonne and on MoP at Rs 14,400 a tonne. In the previous fiscal, the subsidy on DAP and MoP fiscal was at Rs 19,763 and Rs 16,054 per tonne, respectively.

India imported 78.64 lakh tonne urea till February, as against 78.34 lakh tonne in the entire 2011-12 fiscal. During April-February period of 2012-13 fiscal, import of DAP stood at 57.79 lakh tonne, and that of MOP at 18.14 lakh tonne.

On average, India consumes 30 million tonne urea and around 25-26 million tonne DAP, MoP and complex fertilisers annually.

China’s manufacturing, services sectors weaken in January

BEIJING: An official indicator of China‘s manufacturing activity weakened for a second consecutive month in January, following outbreaks of domestic COVID-19 cases that affected the operations of some industries.

The purchasing managers’ index, or PMI, for China’s manufacturing sector fell to 51.3 in January, down 0.6 percentage points from December, according to data from the National Bureau of Statistics on Sunday.

Readings above 50 indicate expansion of the manufacturing industry, while a reading below it reflects a contraction.

China has seen new virus clusters across the country, particularly in the north, and restrictions have been tightened to curb the spread.

NBS senior statistician Zhao Qinghe said that locally transmitted coronavirus cases had affected the operations of certain industries, and that January is typically an off-season for factories due to the Lunar New Year holidays.

Separately, the indicators for China’s service industry also dipped in January amid the local outbreaks.

The PMI for China’s non-manufacturing sector came in at 52.4 in January, down from 55.7 in December, according to NBS.