Analysts have warned that China faces stagflation over the next few quarters, as factory gate price rises faster than anticipated and a continuing power crunch hinders economic growth.

StagflationA situation where the economy experiences both slow growth and high inflation simultaneously. When an oil shock caused a long period of rising prices, but sharply decreasing GDP growth, this phenomenon was first noticed in the 1970s.

China has the producer price index jumped 10.7% in September compared with a year earlier — the fastest pace since October 1996 when data compilation started. In the meantime, power cuts across the country prompted several big banks to slash GDP forecasts for China

According to Charlene Chu of Autonomous Research, China’s senior macrofinancial analyst, this situation made it challenging for Chinese authorities stimulate the economy.

Chu spoke to CNBC’s “Street Signs AsiaThis stimulus might increase energy demand and worsen ongoing power scarcity. She also suggested that economic growth would be impacted by factories shutting down several days per week because of the power crisis.

Chu said that “So, because of that,” he believed that we were in a place where there are several factors weighing down growth that won’t go away soon. He also stated that China is unlikely to give an aggressive Chinese stimulus for the next few months.

The analyst explained that China is used to stimulating the economy and thereby causing a shift in the global economic dynamic.

China’s economy faces multiple challenges. There are many challenges facing China’s economy. 4.9% on-year growth recorded in the third quarterThe year was slowest.  

A slowdown in real estate has also slowed growth, along with the power crisis that has affected factory production.

Troubles in China’s real estate sectorThese issues have been at the forefront of attention in recent months EvergrandeDevelopers struggled to pay back their loans. Beijing launched a campaign to reduce excessive borrowing from property developers.

Chu claimed that China’s economy has been severely affected by the slowdown of the real-estate sector. However, the analyst stated that the country is not at a stage where there’s no confidence in the main property market.

Chu stated that Chu doesn’t believe the authorities want to cause a crisis in confidence throughout the whole developers sector.