Recently, Wall Street has been consistently lowering its expectations for China’s economic growth for the past two weeks. Currently, the vast majority of global banks predict that China’s economic growth in 2024 will be lower than the target.
Following Goldman Sachs, J.P. Morgan, and UBS Group lowering their forecasts for China’s economic growth to less than 5% last week, this week, other banks joining this trend include Bank of America, Canadian investment bank, and TD Securities.
On Wednesday, a report from Bank of America revised China’s economic growth rate for this year from 5% to 4.8% and for the next two years from 4.7% to 4.5%.
Bank of America stated that with the gradual effectiveness of current measures, China’s quarter-on-quarter growth rate in the second quarter has hit its lowest point. Due to insufficient policy support, China’s economic expansion may also fall below potential levels in the next two years.
Global major banks have reached a new consensus that China is unlikely to achieve a 5% growth target in 2024. Given the frequent falsification of official economic data by the Chinese Communist Party, the actual growth situation may be even worse.
Currently, China’s economic growth rate has dropped to the lowest level in five quarters.
Bank of America economist Helen Qiao wrote in the report: “We found that both fiscal and monetary policy stances are not as loose as expected, insufficient to revive domestic demand growth.”
Exports are currently the main reliance of China’s economy, but Bank of America emphasized that the November US presidential election is a major uncertainty factor for China’s economic growth.
China’s new export order sub-index has been below 50 for four consecutive months, signaling a bad omen for this key growth engine.
Economists believe that as trade disputes intensify due to the influx of cheap Chinese products into the global market and with increasing protection measures in other regions to support domestic industries, China’s exports may be under pressure.
TD Securities economist Hunter Chan warned that besides the drag from the slowing property market in the first half of the year, there is also a risk of “escalating trade tensions between China and other economies.”
Moreover, according to official Chinese data, in the first seven months, the broad indicator of government expenditure shrank, despite a decrease in loan rates, indicating subdued credit demand.
Even the flexible service industry is losing momentum. A private survey on Wednesday showed that due to intensified competition and enterprises being forced to lower prices to maintain market share, China’s service sector activity growth in August fell below expectations.
Barclays economists stated in the report, “With softening domestic demand exacerbating overcapacity issues, price wars or price cuts are becoming increasingly common across industries, and many industries have similar products with intense competition.”
“A decline in profits could lead to wage cuts and layoffs, which is not a good sign for consumption,” they noted.
TD Securities strategist Alex Loo pointed out that due to stalled government spending, lack of private investment, and the “pervasive pessimism among domestic companies and major importers,” Beijing is once again unlikely to meet its growth targets.
Wall Street’s downward revision of China’s economic expectations has heightened concerns about the trajectory of the Chinese economy, as policymakers struggle to address long-term slowdown in the real estate industry and weak consumer and investor confidence.
UBS economist Wang Tao said in last week’s report that the weakness of China’s property market has exceeded expectations, and bottoming out is not expected until mid-2026.
The report also mentioned that the drag of the property market on the overall Chinese economy will be greater than previously expected, affecting household consumption.
UBS stated that measures introduced by Beijing to revitalize the property market since the end of 2022—including lowering down payment requirements, reducing mortgage rates, and easing home purchase restrictions—have shown slow progress and limited impact.
Official Chinese data for economic performance and inflation in August will be released next week. Citigroup warned on Tuesday that China suffered a “double blow of weather impact and weak demand” in August, with steel production shrinking by 8.5%, lower than July’s 5.3%.
Citigroup cautioned about the risks Beijing faces in achieving its official growth targets.
Over the past two years, the real estate crisis has dragged down all aspects of China’s economy from employment to consumption and household wealth.
The measures taken by the authorities to restore investor confidence have been sluggish and inadequate, resulting in a prolonged free fall in the Chinese stock market. On September 3, the A-shares market once again initiated a battle to defend the 2800 point mark.
That day, mainland economist Ren Zeping mocked on Weibo stating: “Previously 3000 points made you look down, now 3000 points make it difficult to rise,” and “mocking 3000, doubting 3000, accepting 3000, longing for 3000.”
Alpine Macro’s Chief Emerging Markets and China strategist Wang Yang just concluded his trip to China. In last week’s report to clients, he said that Chinese policymakers seem to be “paralyzed.”
Wang mentioned that Beijing lacks a coherent strategy to address China’s increasingly severe economic challenges, and even the scattered measures taken so far have been temporary and indecisive.
He believes that the 5% economic growth target is “almost impossible” to achieve, and there is a risk of “slow internal explosion” in China’s future.