Investment banks slash China growth outlook — one puts GDP below 4%
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Long-term lockdowns in Shanghai have caused supply chain disruptions and led banks to reduce China’s GDP projections. This is a picture of a truck carrying supplies to Shanghai’s healthcare facilities as it leaves a port in April 2022.
Visual China Group | Visual China Group | Getty Images
BEIJING — In just about a week, several investment banks have cut their China growth forecasts as Covid lockdowns drag on in the economic hub of Shanghai.
CNBC tracked nine financial companies and the median forecast for China’s GDP growth was 4.5%. This is well below the 5.5% official target by government.
Nomura was at the bottom of the predictions with a forecast for 3.9%. This is down from previous 4.3%.
“Strongly enforced [zero-Covid strategy]”It causes a huge supply shock to all of the economy, particularly to cities that are under partial or full lockdown,” Ting Lu, chief China economist at Japanese bank JIB said in a Wednesday report.
He said that “this supply shock could further reduce demand for housing, durable goods, and capital goods because of falling incomes and increasing uncertainty.”
China’s worst Covid epidemic since 2020 has been fought by mainland China in March. Shanghai, home to the world’s busiest port,One of the most affected regions has been this one. Two-part, citywide lockdown began approximately a month ago and has not been lifted.
A major business district in Beijing,On Monday, the National Capital began three days’ mass testing and then closed all non-essential businesses in one place to stop a sudden spike in case numbers over the weekend.
UBS: This is the biggest cut
UBS, out of nine financial companies, cut China’s GDP growth goal the most. This was due to “intensified down pressure on the economic system.”
Wang Tao, an economist and author of the April 18 report said that despite expectations for greater policy support, Beijing will not do what it takes to reach its goals despite her team’s expectation. official 5.5% targetIt was created before the Russia-Ukraine war and the new wave of Covid.
Wang stated that the economic effects of Covid policies alone are unlikely to change government’s Covid policy. However, Wang noted that minimizing Covid deaths and cases will continue to be Wang’s top priority.
Shanghai has recorded 150 Covid-related death as of Tuesday morning.
Bank of America: This is the second-largest cut
Helen Qiao from Bank of America, China economist made the second largest reduction at 4.8%
The bank stated in an April 19 report that the restrictions and lockdowns imposed by Covid-19 in Shanghai and nearby cities were not only impacting local demand, but are also creating logistical breakdowns and wide-ranging supply chain disruptions both within the region and beyond.
According to the report, “In our opinion, even if these control measures are eventually rolled back, and economic activities gradually normalize before mid-year,” a significant impact on growth seems already inevitable.”
Allianz Trade: Frequent cuts
Allianz Trade saw its forecast decrease as the second in a matter of months.
On Wednesday, the firm lowered its GDP forecast to 4.6%, down from 4.9% — which itself was a revision from the 5.2% estimate set around the start of the year.
The first downgrade came after Russia invaded Ukraine in late February, and the second downgrade assumes the Shanghai lockdown lasts for a month before a return closer to pre-pandemic levels in May, said Françoise Huang, senior economist at Allianz Trade.
China’s GDP will only increase by 3.8% if Shanghai is locked down for at least two months.
The following week saw the International Monetary FundYou can also lower the prices its China GDP forecastFor the second year in a row. According to the IMF, 5.6% growth is expected in 2022, this estimate has been revised down from 4.4% in January.
JPMorgan, Barclays: Trimming after GDP data
China published its April 18th report first-quarter GDP grew by a greater-than-expected 4.8%,Forecasts for industrial production and fixed assets investment are also high. However, retail sales declined by 3.5% more than was expected.
JPMorgan lowered its full-year GDP forecast to 4.6% on the same day. It had previously been 4.9%. This was mostly due to lower consumption growth expectations. Exports were not revised and investment was lowered by 0.1%.
“It shouldn’t surprise you.” [the]The bank’s emerging market Asia economic and policy team stated that the Omicron drag on economy activity would be higher in April than it was in March. According to them, 25% or more of China that accounts for the nation’s GDP was locked down as of April 1, they estimated.
Barclays also reduced its full-year GDP projection to 4.3% on April 18 (from 4.5% on April 17). This was due to the expectation that Covid disruptions would last a while.
Morgan Stanley’s March 31 forecast was already reduced to 4.6%, from 5.1% before. Robin Xing (economist) and his team stated that China won’t likely stop its zero-Covid strategy until after a planned political reshuffle this fall.
According to the report, “This would mean that consumption would be restricted by sporadic lockdowns throughout the country in the next two quarters even though production would remain protected by closed loop management system.”
Citi, Goldman Sachs: Holding steady
All banks did not reduce their China GDP projections.
Citi raised its April 18 estimate by 5.1% to reflect China’s GDP beat in the first quarter. The bank reported that it had a total of 5.1% in late March. raised its forecast to 5%Growth of 4.7% is based on stronger-than-expected economic numbers in February and January, as well as expectations for greater government support.
Goldman Sachs maintained last week its China GDP forecast at 4.5%, according to a report.
“We believe the negative Covid impact could extend to April and even beyond and expect a weak start for Q2, despite the stronger-than-expected Q1 GDP print,” Lisheng Wang and a team said in an April 18 report. In the next few months, more measures will be taken to encourage growth.
After a review, the investment bank raised its January GDP projection to 4.5%. better-than-expected fourth quarter GDP report.Goldman had earlier in the month announced that they were launching a forecast of 4.3%This is a decrease of 4.8% from the previous 4.8%. It was expected that China’s efforts to regulate highly transmissible Omicron variant would have a greater impact on consumption.
— CNBC’s Michael Bloom contributed to this report.
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