Stay informed with free updates
Simply sign up to the Chinese economy myFT Digest — delivered directly to your inbox.
Investment banks are cutting their growth forecasts for China, believing Beijing risks undershooting its official target of about 5 per cent as confidence wanes in the world’s second-largest economy.
Bank of America on Wednesday lowered its forecast to 4.8 per cent from 5 per cent and Canadian investment bank TD Securities cut to 4.7 per cent from 5.1 per cent. The moves followed a UBS cut last week and a series of similar reductions over the summer.
Economists at Citi this week warned that Beijing’s official growth target — which is the lowest in decades at “around 5 per cent” — “could be at risk”, adding to mounting concerns over the trajectory of China’s economy as policymakers grapple with a prolonged property sector slowdown and weak consumer and investor confidence.
The median forecast for full-year gross domestic product growth across dozens of economists polled by Bloomberg has slipped to 4.8 per cent, compared with 4.9 per cent in mid-August. Last year, China grew 5.2 per cent, in line with forecasts.
Bank of America analysts said China’s growth engine was “sputtering” in the second and third quarters, adding that the economy “continues to struggle with a confidence problem”.
For decades, China’s GDP growth easily met the government’s target, which is announced at a meeting of the rubber-stamp parliament early each year. But in the wake of the Covid pandemic, the figure has attracted close scrutiny.
“I think [the reason] why it’s now acquired an increased importance is [that] there a…rising trade tensions between China and other economies” on top of the drag from a housing slowdown in the first half. “Right now, the government’s policy on the housing sector is about stabilising [it],” he said.
China missed its 2022 GDP target, expanding just 3 percent on a goal of 5.5 percent after a series of Covid lockdowns. A drumroll of disappointing data releases this year has spurred calls for more government stimulus.
Alex Loo, a strategist at TD Securities, projected Beijing would miss its target again this year unless there was a mid-year budget expansion, citing “faltering spending”, a lack of private investment and “pessimism taking hold” among domestic companies and major importers.
He said officials were likely to “steer away from mention of the target like in 2022” if the August data misses expectations again.
