China Xinxin, Q1 GDP Growth Forecast at 4.9%... IBs Also Raise Estimates Consecutively

Goldman Sachs Raises Annual Growth Forecast from 4.8% to 5.0%
Morgan Stanley Also Revises Up from 4.2% to 4.8%

Due to the recovery in exports and consumer sentiment, China's economic growth rate for the first quarter is expected to be around 4.9%. Earlier, major global investment banks (IBs) also raised their annual growth forecasts one after another, adding weight to the outlook for China's economic recovery.

On the 11th, Chinese economic media Caixin reported that economists surveyed from 14 domestic and international institutions predicted the first quarter GDP growth rate this year to be 4.9% year-on-year. This is 0.3 percentage points lower than the 5.2% recorded in the fourth quarter of last year. The lowest forecast was 4.4%, and the highest was around 5.2%.

[Image source= Xinhua News Agency]

One of China's largest IBs, China International Capital Corporation (CICC), raised its first-quarter forecast from 4.5% to 5.0?5.5%, citing that key economic indicators for January and February exceeded market expectations, and that the leap year effect and partial improvements in economic fundamentals were reflected. It also diagnosed that exports led the economic recovery, and the boom in goods and services consumption during the Lunar New Year holiday was another factor stimulating the economy. Regarding the somewhat sluggish figure compared to the previous quarter, Wang Tao, UBS Chief China Economist, explained, "The first quarter GDP shows improved growth momentum, but it may be lower than the fourth quarter of last year due to a high base."

Won Bin, Chief Economist at China Minsheng Bank, evaluated that the monthly growth rate of manufacturing was better than expected and showed a solid supply and demand situation. Although the real estate and infrastructure industry chains were relatively weak, strong production in the automobile and chemical sectors is expected to result in an industrial value-added growth rate of around 7.2% in March.

However, survey participants still viewed the consumer recovery trend as somewhat weak. The macro team at CITIC Securities predicted that retail sales would remain sluggish in March and that the year-on-year growth rate could be negative due to a base effect. However, they expected automobile sales to show an improving trend due to government policies encouraging the replacement of old consumer goods.

Additionally, the average forecast for the first quarter fixed asset investment growth rate by economists was 4.1%, down 0.1 percentage points from before. Five institutions expected the investment growth rate to improve in the first quarter, while ten institutions forecast a decline. The export growth rate for March was expected to shift from a 7.1% year-on-year increase in January and February to a 4.5% decrease.

Earlier, global investment banks Goldman Sachs and Morgan Stanley both raised their growth forecasts for China. According to Bloomberg, Goldman Sachs economists led by San Hu Yi predicted that China's economy expanded at an annualized rate of 7.5% in the first quarter compared to the fourth quarter of last year. This is 1.9 percentage points higher than the previous forecast of 5.6%, and Goldman Sachs also slightly raised its annual growth forecast for China from 4.8% to 5.0%.

Morgan Stanley also raised its annual growth forecast for China from 4.2% to 4.8%, citing the recovery in U.S. demand and strong exports. If these institutions' forecasts are accurate, the Chinese government will achieve its growth target of around 5.0% for this year.