Barclays, Goldman Sachs Downgrade
Concerns Rise as Q2 Growth Stalls at 4.7%
Global investment banks (IBs) have successively downgraded their economic growth forecasts for China to the 4% range this year. This reflects the judgment that domestic demand shows no signs of improvement amid growth rates falling short of expectations in the second quarter.
According to the Hong Kong South China Morning Post (SCMP) on the 16th, British IB Barclays lowered its forecast for China's GDP growth rate this year from 5.0% to 4.8%. Goldman Sachs also cut its related figure from 5.0% to 4.9%.
Singapore's UOB Group also predicted that China's economy will grow by only 4.9% this year, lowering its previous forecast (5.1%) by 0.2 percentage points.
These IB adjustments came after China's National Bureau of Statistics announced on the 15th that the GDP growth rate for the second quarter was 4.7%. This not only represents a sharp slowdown compared to the first quarter (5.3%) but also falls short of market expectations (5.1%). The overall growth rate for the first half of the year was 5.0%, barely maintaining the government's annual target (around 5.0%). After the announcement, Goldman Sachs evaluated that "more policy easing will be needed for the remainder of the year to offset weak domestic demand."
China's retail sales in June increased by only 2.0% year-on-year, falling short of both the forecast (3.3%) and the previous month's figure (3.7%). The 2.0% retail sales growth rate is the weakest since December 2022 (-1.8%), when the market was in turmoil following the end of the zero-COVID policy.
Some optimistic views suggest that economic stimulus measures may be presented through the 3rd Plenary Session of the 20th Central Committee of the Communist Party (3중전회), potentially putting China's economy on a recovery track. Citibank stated, "China is at a critical point facing greater downside risks," adding, "Disappointing figures do not mean that growth targets are unattainable." It further explained, "This background could help facilitate larger-scale economic stimulus, and we expect goal-oriented and appropriate policies in the second half of the year."
Swiss UBS, which maintained its growth forecast for China at 4.9% this year, said, "With the second-quarter growth rate recording a disappointing level, achieving the official target of 5.0% this year looks difficult," and predicted, "The government will implement additional policy support in the second half to promote growth."
The International Monetary Fund (IMF) maintained its growth forecast for China at 5.0% this year even after reviewing the second-quarter results. The IMF initially predicted China's growth rate at 4.6% in the April World Economic Outlook (WEO), revised it to 5.0% in May, and announced on the 16th of this month that it would maintain this forecast in the WEO.
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