According to surveys conducted by the “Nikkei Economic News” and “Nikkei QUICK News” among 28 economists, the average forecast for China’s third-quarter gross domestic product (GDP) growth rate is 4.6% compared to the same period last year. Due to concerns over a slowdown in the real estate market leading to deflation, the growth rate is expected to decrease from the second quarter’s 4.7%.
Economists predict that the maximum and minimum growth rates for China’s GDP from July to September are 4.9% and 4.3% respectively. The seasonally adjusted year-on-year growth rate of economic development is 1.1%, showing a slight rebound from the forecasted 0.7% for April to June. Overall, the outlook appears more challenging.
The average forecast for China’s full-year GDP growth rate in 2024 by economists is at 4.8%, which is 0.1% lower compared to the previous survey in June and falls below the Chinese government’s target of around “5%”.
Ito Hideki, Chief Researcher at Mizuho Bank (China), believes that the real estate market will continue to struggle in the second half of 2024, and the slowdown in consumption caused by the “negative asset effect” will not change. Despite the government’s measures including repurchasing existing homes, he believes these actions have not been fully effective.
Real estate is estimated to represent around 70% of Chinese households’ assets. A drop in house prices can suppress consumer confidence and is directly related to negative asset effects.
Economist Alex Muscatelli from Fitch Ratings warns: “The risks of deflationary pressures are becoming more apparent.” Zenko Tetsuji, Chief Asian Economist at Sumitomo Mitsui Trust Asset Management (Hong Kong) Limited, analyzes that unless the government is willing to take fundamental measures without budget constraints, the sentiment of deflation will not improve.
It is noted that the practice of relying on overseas demand to offset insufficient domestic demand for manufacturing exports is “approaching its limits.” In August, the industrial production index grew by 4.5% year-on-year, lower than July’s 5.1%.
The People’s Bank of China announced a new round of easing measures on September 24, while also lowering deposit reserve ratios and real interest rates.
Recently, Reuters reported that in order to stimulate consumption, the Chinese authorities plan to issue approximately 2 trillion yuan worth of special government bonds. This survey was conducted before speculation about the special government bonds surfaced, indicating that economists may modify their GDP growth forecasts if the special government bonds are officially introduced.
There are opinions that in a situation of insufficient capital demand, the effects of easing policies would be less effective, and stakeholders are closely monitoring the direction of the fiscal policies being discussed by the government.
The survey also asked about the impact of the upcoming US presidential election in November on the Chinese economy. Some economists are cautious about the re-election of Republican candidate Trump.
Lee Hou Ming from Lombard Odier predicts that if Trump’s policy to impose a unified 60% additional tariff on Chinese imported goods is implemented, it will “cause negative impacts, leading to a maximum 2% decrease in China’s economic growth rate.”
The “Nikkei Economic News” also predicts that the average economic growth rate for China in 2025 will be 4.5% and it will further decelerate to 4.2% in 2026.
Sophie Altermatt from Julius Baer believes that structural issues will hinder economic growth, as “inadequate social security leads people to prioritize savings, thereby suppressing consumption.”