"China's Export Improvement... Growth Rate Forecast Revised Up from 4.9% to 5.0%"

Bloomberg Survey of 22 Economists Covering the Chinese Economy

Economic experts have predicted that China's economy will outperform initial forecasts this year, based on improvements in exports.

On the 25th (local time), Bloomberg reported that a survey conducted from the 17th to the 24th among 22 economists responsible for China's economy showed that the economic growth forecast for China this year was 5.0%, up 0.1 percentage points from last month's 4.9%.

[Image source=AFP Yonhap News]

This improvement is attributed to China's export growth. Experts revised upward their forecast for China's export growth rate this year from an initial 2.8% increase year-on-year (as of May) to 4.3%. Serena Zhou, Chief China Economist at Mizuho Securities Asia, said, "Global demand is shifting back from services to goods, and we expect trade prospects to improve over the coming months."

China's exports in April and May showed strong performance, reflecting increased overseas demand and improved competitiveness of Chinese manufacturers. In dollar terms, China's exports rose 1.5% in April and 7.6% in May compared to the same period last year, exceeding expectations. However, Bloomberg noted that risks are increasing as Chinese companies begin to face more trade barriers from the US and Europe.

This survey result contrasts with a report released by Goldman Sachs on the 23rd, which took a more pessimistic view of China's exports going forward. The report explained, "Investors are concerned about the sustainability of supply-side expansion when domestic demand is weak, especially the risks of trade frictions in a weak demand environment."

However, based on pessimism stemming from the sluggish real estate market, experts lowered their expectations for key indicators of consumer spending such as retail sales, consumer prices, and producer prices in this survey. Experts forecast that China's consumer prices will rise by only 0.6% this year, while producer prices are expected to decline by 1%.

Arjen van Dijkhuizen, Chief Economist at ABN AMRO, stated, "Recent macro data show that difficulties in the real estate sector still remain," adding, "Strong momentum in exports continues to support growth, but China's excess production capacity is fueling trade disputes, and the US and Europe's moves to protect strategic industries are intensifying."

Erika Tay, Economist at Maybank Securities, added, "Tensions in the labor market continue to weigh on consumer spending," and explained, "Although the advanced manufacturing sector holds global market share, their profits will only offset the GDP growth delays caused by weak consumption."

Additionally, Bloomberg reported that experts who had previously expected the People's Bank of China, the country's central bank, to cut the reserve requirement ratio (RRR) in the second quarter have now pushed back the timing to the third quarter. They also forecast that, with the central bank focusing on efficiency, the growth rate of money supply will slow compared to May, and policy interest rates and the loan prime rate (LPR) may be cut in the third quarter.