Goldman upgrades China growth forecasts on latest stimulus

BEIJING – Goldman Sachs Group 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 (GDP) to expand 4.9 per cent in 2024, up from 4.7 per cent previously. It also lifted its growth prediction for 2025 to 4.7 per cent from 4.3 per cent, according to a report dated Oct 13.

“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 chief China economist 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. China’s Finance Ministry vowed greater fiscal support in a much-anticipated briefing on Oct 12, although it lacked steps to boost consumption some analysts say are needed to beat deflation.

“The policy to support consumption sounds quite weak,” said BNP Paribas chief China economist Jacqueline Rong. “It is still too early to call an imminent significant turnaround in deflationary pressure or a bottoming out of the property market, which are the two key issues faced by the Chinese economy.”

Chinese Finance Minister Lan Fo’an said 2.3 trillion yuan (S$424 billion) 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, China’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 2025 by the end of October. That is an effort to meet the “around 5 per cent” GDP growth target for 2024, the bank said.

The easing measures that were announced and hinted at will translate into a 0.4 percentage point increase to economic growth in 2025, helping offset a projected 1.9 percentage point drag from slowing exports and the continued property downturn, according to Goldman’s report.

In further action to allay concerns about the economy, officials on Oct 14 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 on improving sentiment in the private sector, which accounts for more than 80 per cent 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.
BLOOMBERG