Several US and international banks have increased their forecasts for China’s economic growth this year, encouraged by stronger-than-anticipated data from the second quarter. Institutions such as Morgan Stanley, Goldman Sachs Group Inc., and Barclays Plc have revised their full-year gross domestic product (GDP) expansion estimates to approach 5 per cent. ANZ now projects a 5.1 per cent growth for 2024.
Official data revealed surprising resilience in the face of US tariffs, attributed to robust exports and supportive policies aimed at consumption and investment. However, economists caution that this growth is likely to decelerate due to an expected reduction in overseas shipments and subdued domestic consumer sentiment. The better than expected Q2 data lead to the upward revisions, but experts expect the momentum to fade.
Furthermore, increasing deflation has reduced nominal GDP growth to just 3.9 per cent in the second quarter, the slowest pace outside the pandemic period since quarterly data collection began in 1993. This situation presents an opportunity for authorities to address falling prices before the economy loses momentum, although a solution may prove challenging. Policy makers have indicated that they want to curb price wars, which is a step in the right direction.
Analysts warn that GDP growth could fall below 4.5 per cent in the latter half of the year, influenced by a payback effect from front-loaded export orders and the diminishing impact of fiscal stimulus. It is forecasted that policymakers might implement a moderate increase in fiscal stimulus, ranging from 500 billion yuan ($US70 billion) to 1 trillion yuan.
