Wall Street brokerages raise China’s 2023 economic growth forecast

JPMORGAN, Citigroup and Nomura on Wednesday (Oct 18) lifted their forecast for China’s economic growth for the year following upbeat data, but highlighted the need for more stimulus.

Data on Wednesday showed China’s gross domestic product (GDP) rose at a faster-than-expected 4.9 per cent in July-September from a year earlier, and along with data showing a rise in consumption and industrial activity in September, suggested a tentative recovery thanks to a recent flurry of policy measures.

Third-quarter growth was, however, slower than the 6.3 per cent expansion in the second quarter.

Citigroup now expects China’s GDP to grow 5.3 per cent in 2023 from 5 per cent earlier, while JPMorgan and Nomura see it at 5.2 per cent and 5.1 per cent, respectively.

Goldman Sachs trimmed its forecast to 5.3 per cent from 5.4 per cent, still higher than Beijing’s official target of a 5 per cent growth for the year.

“Like August, September monthly activity came in stronger than expected. This is encouraging,” JPMorgan economists, led by Haibin Zhu, said.

JPMorgan expects the economic momentum to persist in the coming months.

However, weak growth in nominal GDP – which includes inflation effects – suggests that the earnings and profit outlook will remain a hurdle in the path to the recovery in private investment, JPMorgan said.

This points to the need to step up stimulus and reforms to “decisively fend off a debt-deflation loop,” economists at Morgan Stanley led by Jenny Zheng, said.

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Since the 5 per cent growth target looks achievable, policy space could be saved for next year, Zheng said.

Beijing has in recent weeks unveiled a raft of measures, including more public works spending, interest rate cuts, property easing and efforts to shore up the private sector, after growth momentum in the world’s second-largest economy dropped.

The government’s ability to spur growth has been hamstrung by fears over debt risks and a fragile yuan.

The next policy signpost to watch will be China’s central economic work conference in December, Morgan Stanley said.

JPMorgan expects China’s potential growth coming down faster than initially expected in 2024 and 2025 to a range of 4 per cent-4.5 per cent and 3.5 per cent-4 per cent, respectively. REUTERS