(Oct 14): Goldman Sachs Group Inc upgraded its forecasts for China’s economic growth in 2024 and 2025, after Beijing unveiled a series of measures to shore up growth, including plans for greater public spending announced over the weekend.
The bank expects China’s gross domestic product to expand 4.9% this year, up from 4.7% previously. It also lifted its growth prediction for next year to 4.7% from 4.3%, according to a report on Sunday.
“The latest round of China stimulus clearly indicates that policymakers have made a turn on cyclical policy management and increased their focus on the economy,” Goldman economists including Hui Shan wrote.
The upgrade comes as economists and investors assess the potential effects of Beijing’s push since late September to boost an economy facing weak sentiment and persistent deflationary pressures. The Finance Ministry vowed greater fiscal support in a much-anticipated briefing on Saturday, although it lacked steps to boost consumption some analysts say are needed to beat deflation.
Chinese shares fluctuated when trading resumed on Monday, as officials vowed to step up support for businesses. China’s offshore yuan pared losses after weakening as much as 0.3% against the greenback.
Finance officials said 2.3 trillion yuan (US$325 billion or RM1.4 trillion) of local government special bond funds will be used in the fourth quarter, suggesting a more “back-loaded” public spending schedule and a bigger growth rebound than the bank previously anticipated, according to Goldman’s report.
In addition, the nation’s top economic planning agency, the National Development and Reform Commission, said last week it would pre-approve 200 billion yuan worth of investment projects for next year by the end of this month. That’s an effort to meet the “around 5%” GDP growth target for this year, the bank said.
The easing measures that were announced and hinted at will translate into a 0.4 percentage point increase to economic growth next year, helping offset a projected 1.9 percentage point drag from slowing exports and continued property downturn, according to the report.
In further action to allay concerns about the economy, officials on Monday promised to ramp up pro-business policies, including unspecified measures to foster “unicorn” start-ups valued at over US$1 billion. The country’s market regulator also vowed to crack down on officials collecting excessive fines to shore up falling income.
These steps appear intent to improve sentiment in the private sector, which accounts for more than 80% of urban jobs but has seen its profits squeezed by the slowing economy and falling prices.
However, Goldman warned that China’s structural challenges remain, and maintained its forecasts for 2026 and beyond.
“The ‘3D’ challenges — deteriorating demographics, a multi-year debt deleveraging trend, and the global supply chain de-risking push — are unlikely to be reversed by the latest round of policy easing,” the economists wrote.
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