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Investment banks cut China’s growth outlook – one puts GDP below 4%


The prolonged lockdown in Shanghai has hurt supply chains and prompted banks to cut their GDP forecasts for China. Here, a truck leaves the port on April 13, 2022, with healthcare items for Shanghai.

Tang Ke | Visual China Corporation | beautiful pictures

BEIJING – In just about a week, several investment banks have slashed their China growth forecasts as Covid-19 shutdowns drag on in economic hub Shanghai.

The new median forecast among the nine financial firms tracked by CNBC predicts China’s GDP growth of 4.5% for the full year. This is far below the government’s official target of 5.5% growth.

At the bottom of the predictions is Nomura with a forecast of 3.9%, down from 4.3% previously.

“Strict enforcement [zero-Covid strategy] That’s a huge supply shock to the economy as a whole, especially for member states, said Ting Lu, chief economist at Japan Investment Bank in China in a report on Wednesday. The street is closed in whole and in part.

“This supply shock could further undermine demand for housing, durable goods and capital goods as income falls and increases uncertainty,” he said.

Since March, mainland China has faced its worst Covid outbreak since early 2020. Shanghai, home to the busiest harbor in the world, is one of the hardest hit areas. A citywide, two-part strike that began about a month ago has dragged on with no clear end in sight.

A large business district in Beijing, The nation’s capital, began three days of mass testing on Monday and closed non-essential businesses in an area to control a spike in cases over the weekend.

UBS: Biggest Cuts

“We also do not believe that the economic impact of the Covid policy alone will change the government’s Covid policy any time soon, as minimizing Covid cases and deaths will likely remain the top priority,” Wang said. speak.

As of Tuesday morning, Shanghai has recorded more than 150 Covid-related deaths.

Bank of America: Second Biggest Cut

Bank of America China economist Helen Qiao made the second-biggest cut, dropping 0.6 percentage points to 4.8%.

The bank said in an April 19 report: “Covid-19 bans and restrictions imposed in Shanghai and surrounding cities have not only impacted local demand, but also caused logistical problems and widespread supply chain disruptions in and out of the region”.

“In our view, even if such control measures are eventually withdrawn and economic activities gradually normalize by mid-year, a heavy toll on growth is likely to occur. as inevitable,” the report said.

Allianz Trade: Regular cuts

JPMorgan, Barclays: Cut after GDP data

China reported on April 18 that GDP growth for the first quarter was 4.8% higher than expected, with industrial production and fixed asset investment also topping the forecast. However, retail sales came in 3.5% higher than expected.

Later that day, JPMorgan cut its full-year GDP forecast to 4.6%, down from 4.9% previously. Much of the downgrade came from a drop in consumption growth expectations, where exports were flat and investment fell 0.1 percentage points.

“It won’t be surprising [the] The bank’s Asian Emerging Markets Policy and Economic Research Group said Omicron’s drag on economic activity would be greater in April than it was in March.

Read more about China from CNBC Pro

Also on April 18, Barclays cut its full-year GDP forecast to 4.3%, down from 4.5%, on expectations that the Covid disruption would last for a while.

Morgan Stanley cut its forecast on March 31, to 4.6% from 5.1% previously. Economist Robin Xing and his team say China likely won’t end its zero-Covid policy until after a scheduled political reshuffle in the fall.

“This means that sporadic nationwide shutdowns over the next two quarters will limit consumption, even as production will be sheltered by closed-loop management systems,” the report said.

Citi, Goldman Sachs: Hold steady

Not all banks cut their China GDP forecasts.

Citi on April 18 raised its estimate to 5.1% after China’s first quarter GDP beat. At the end of March, the bank raise forecast by 5% growth from 4.7% based on better-than-expected economic data in January and February, and expectations of stronger government support.

Last week, Goldman Sachs said it maintained its China GDP forecast at 4.5% for the year after releasing first-quarter data.

“We believe the negative impact of Covid could last through April and even beyond and expect a weak start to Q2, despite Q1 GDP,” said Lisheng Wang and team. stronger than expected.” They expect more easing measures in the coming months to support growth.

The investment bank raised its GDP forecast for January to 4.5% after The fourth quarter GDP report was better than expected. Earlier that month, Goldman announced a forecast is 4.3%down from 4.8%, with the expectation that consumption will suffer more as China tries to control the highly contagious omicron variant.

– Michael Bloom of CNBC contributed to this report.



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