Growth forecasts for China were cut by global investment banks, with the economy struggling on several fronts, from COVID outbreaks to downward pressures from the real estate sector.
Updates in mid-August for GDP range down pessimistically by several tenths and they are further and further away from the Chinese regime’s original goal of reaching a 5.5% hike by 2022.
Goldman Sachs Group changed its forecast for gross domestic product growth from 3.3% to 3%, while Nomura Holdings cut its forecast from 3.3% to 2.8%. At the same time, Standard Chartered forecast China’s GDP growth of 3.3%. Last month, the International Monetary Fundlowered its forecast from 4.4% to 3.3%.
All these figures are below the 3.8% consensus that I had found Bloomberg in a survey of economists.
Nomura cut his forecast citing weak activity data for July, the lingering impact of the pandemic and the worst heat wave in six decades. “The response may have been too little, too late and too ineffective”, said the agency, which lowered China’s growth forecast to 2.9% in the third quarter from 4.0%.
Its 2023 GDP forecast was also cut, to 5.1% from 5.5%, with Nomura expecting “a new round of cuts” in the coming weeks from other brokerages.
“The second quarter has been extremely low due to COVID restrictions”, said Alicia García Herrero, chief Asia-Pacific economist at French investment bank Natixis. “The third quarter has not started very well, with a certain reduction in internal mobility since the maximum reached in June, but also [debido a] a worsening of the environment for home sales, which is growing very negatively, as well as investment in real estate fixed assets”, he analyzed in statements to the South China Morning Post.
New coronavirus outbreaks following strict lockdowns in the financial centers of Shanghai and Shenzhen earlier this year are the main reasons why banks have lowered forecasts, as China insists on the “Zero COVID” policy that comes with it. immediate measures upon detection of cases.
But investment banks have also pointed to falls in property investment and related consumption in July and early August.
Other data indicates that industrial activity is “likely to remain weak” in August due to deteriorating consumer confidence and new virus outbreaks, Standard Chartered said.
On Monday, China’s central bank cut lending rates in a surprising move to revive demandsince the data showed a unexpected slowdown in the economy in Julywith the activity of factories and retail trade.
The grim set of figures indicates the world’s second-largest economy is struggling to shake off the June quarter’s hit to growth due to tight COVID restrictions, prompting some economists to lower their projections.
Industrial production grew 3.8% in July compared to the previous year, according to the National Statistics Office (ONE), below the 3.9% expansion in June and the 4.6% increase expected by the analysts in a survey Reuters.
Investment banks have also pointed to falls in property investment and related consumption in July and early August. “Retail sales of property-related items, such as furniture and building materials, underperformed significantly other items,” Goldman Sachs economists said on Wednesday. “Y real estate services fell sharplyweighing down the global production of services”.
Indebtedness, defaults and falling prices have unhinged the Chinese real estate market in the last two years.
Meanwhile, China’s worst heat wave in six decades, with temperatures reaching over 40 degrees Celsius in densely populated parts of the country this month, has put more pressure on the industry and also threatens crops. In Sichuan, one of the hardest-hit provinces, the government focused on supplying power to households and prompted a short-term shutdown of major industries. Several provinces are limiting electricity use or rationing power, Nomura said.