Introduction

International investment firms have been adjusting their China GDP forecasts on a monthly basis this year, with JPMorgan making six adjustments since January. This analysis is based on a review of notes from these firms. JPMorgan has not yet commented on these adjustments.

Latest Forecasts

JPMorgan recently lowered its China GDP forecast from 5.5% to 5% in July. Citi and Morgan Stanley also made cuts this month, with their forecasts now matching JPMorgan’s at 5%. The average prediction from the six firms studied by AsumeTech is now 5.1%, which is close to Beijing’s announced target of “around 5%” in March.

Forecast Revisions

Citi has revised its forecast four times this year, while Morgan Stanley has only made one adjustment since January. In the same period, Nomura changed its forecast four times, UBS adjusted it three times, and Goldman Sachs changed forecasts twice.

Reasons for Cuts

The investment banks initially raised their forecasts earlier this year following China’s rebound from three years of strict COVID-19 controls. However, recent economic data indicated slower growth than expected, and authorities have shown little interest in implementing large-scale stimulus measures. Second-quarter GDP grew by 6.3% compared to the previous year, falling short of the 7.3% growth predicted by analysts. However, this disappointment can be attributed to revisions made by China’s National Bureau of Statistics to last year’s quarter-on-quarter growth figures.

Non-Official Data

Researchers, such as China Beige Book, have sought alternatives to gauge China’s economic growth. China Beige Book regularly surveys businesses in China and releases reports on the economic environment. Their data indicated that there was no revenge spending wave or a bombastic recovery, contrary to the blockbuster growth predicted by Wall Street. It is important to consider that investment banks may not publish views critical of China’s economy due to their business interests in the country.

Institutional Predictions

The World Bank and International Monetary Fund also release economic forecasts for China and other countries, but their reporting schedules may not fully align with the current economic situation. In June, the World Bank raised its forecast for China’s growth this year to 5.6% from 4.3% previously. The International Monetary Fund also raised its forecast for China’s GDP to 5.2% from 4.4% previously in April. Chinese officials have emphasized the country’s trajectory towards achieving an annual growth target of around 5%.

Looking Beyond 2023

Despite uncertainty about China’s near-term economic trajectory, analysts expect long-term growth in the world’s second-largest economy. A cyclical rebound is anticipated in early 2024, driven by steady household consumption recovery and restocking of industrial inventories.