Recent data regarding the Chinese economy has prompted several significant American banks, including Goldman Sachs and Citigroup, to revise their growth forecasts for the Dragon.
Analysts from Nomura, meanwhile, suggest that the Asian giant might be on the verge of experiencing a second wave of economic “shocks.”
Determining the veracity of these analyses versus their potential roots in propaganda stemming from the new Cold War between the world’s leading powers is quite complex.
Let’s break it down.
According to figures from China’s National Bureau of Statistics (NBS), the country’s industrial production rose by 4.5% year-on-year in August.
However, this marks a slowdown from July’s 5.1% growth, representing the slowest increase since March.
Retail sales, a vital indicator of consumer consumption, grew by only 2.1% in August, down from the 2.7% rise in July amid severe weather conditions and a peak in summer travel.
Analysts had anticipated a 2.5% growth, highlighting further areas of concern.
Additionally, Foreign Direct Investment (FDI) in China totaled 580.19 billion yuan (approximately $81.80 billion) from January to August, reflecting a significant 31.5% drop compared to the same period last year.
Amid such a scenario, major U.S.
investment banks have lowered their growth projections for China this year.
Notably, both Goldman Sachs and Citigroup have revised their forecasts for the country’s economic growth to 4.7%.
August’s weak economic activity has revealed Beijing’s fragile recovery, underscoring the urgent need for additional stimulus measures to boost consumer demand.
Initially, Goldman Sachs had predicted a growth rate of 4.9% for the year, while Citigroup’s estimate was 4.8%.
However, uncertainties regarding growth have compelled global brokerage firms to reduce their 2024 projections well below the government target of approximately 5%.
Goldman Sachs noted an increasing risk of China failing to meet its annual GDP growth target and proposed that the urgency for further demand stimulus is escalating.
The firm has also maintained its 2025 GDP growth prediction at 4.3%.
Citigroup has adjusted its projections for the end of 2025 from 4.5% to 4.2% due to a lack of critical catalysts for domestic demand.
Their economists emphasized the need for intensified fiscal policies to combat austerity and provide timely growth support.
Nomura’s assessment indicates a rise in government bond financing; however, the growth of infrastructure investment is experiencing a severe slowdown due to strict fiscal conditions imposed on local entities, combined with the ongoing significant contraction of the property sector.
They shed light on deep and widespread salary cuts across the financial sector, which coincides with an acceleration in current house price declines in first-tier cities.
“New housing completions have registered the most significant contraction since the summer of 2022, triggered by a widespread mortgage boycott due to numerous pre-sold homes being delayed in delivery,” explained Nomura analysts.
They warned that the Chinese economy risks facing a second wave of economic shocks.
According to Raymond Yeung, Chief Economist for China at Australia & New Zealand Banking Group Ltd., data from August largely exclude the possibility of reaching the official 5% growth target in 2024 unless top officials are willing to deploy a substantial stimulus package.
However, the precarious nature of U.S.-China relations persists, and should tensions escalate, the economic landscape could become even more complicated.
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