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Goldman cuts China GDP growth forecast cut on energy supply crunch By Reuters

by Mike Robinson

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© Reuters. FILEPHOTO: Wind turbines and power lines are shown at the State Grid Corporation of China’s wind and solar energy storage facility and transmission station in Zhangjiakou of Hebei Province, China on March 18, 2016. REUTERS/Jason Lee

SHANGHAI (Reuters) – Goldman Sachs (NYSE:) has cut China’s economic growth forecast for 2021 to 7.8%, from 8.2%, as energy shortages and deep industrial output cuts add “significant downside pressures”, it said in a note on Tuesday.

Due to rising prices and environmental control, many industries across the country have had to reduce production and several provinces are struggling to provide electricity and heat for their residents.

According to Goldman Sachs, 44% of China’s industrial activities have been affected. This has resulted in a 1 percentage point decrease in annualized GDP growth for the third quarter and 2 percentage points reductions from October through December.

China’s economy already faces restrictions on tech and property sectors, as well as concerns about the fate of China Evergrande, a cash-strapped company in real estate.

Goldman said that there is still uncertainty about the fourth quarter. These risks are primarily related to government management of Evergrande stress, strict enforcement of environmental targets and the level of policy easing.

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