Global Financial Institutions "Cannot Guarantee 8% Economic Growth Rate for China This Year"

Next Year's Growth Rate to Fall Below 5%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Ki Ha-young] Warnings have emerged from global financial institutions that the Chinese economy may slow down faster than market expectations.

According to Bloomberg and others on the 25th, several global financial institutions including Bank of America (BoA) and Citigroup forecast that this year’s growth rate of the Chinese economy will not reach the market consensus average of 8.2%. In particular, concerns have been raised that next year’s growth rate will fall below 5%, marking the lowest growth rate in the past 30 years except for last year’s 2.3% growth.

BoA speculated that Chinese President Xi Jinping might be pushing for an economic restructuring for the first time in 20 years, following Deng Xiaoping’s reform and opening-up policy in the late 1970s and Zhu Rongji’s state-owned enterprise restructuring in the 1990s. The policy shift aims to move away from growth-centered economic policies to stabilize rising debt, reduce inequality, and redirect financial resources toward cutting-edge technology manufacturing.

BoA projected that the Chinese economy will grow by 7.7% this year and 4% next year. However, under a “pessimistic scenario” considering a disorderly real estate market adjustment?such as a 10% drop in property prices, decreased transactions, and restrained bank real estate loans?growth could fall to 7.5% this year and 2.2% next year.

Besides BoA, more financial and forecasting institutions are lowering their expectations for the Chinese economy. This month, Goldman Sachs revised its growth forecast for China from 8.2% to 7.8%, and Nomura lowered it from 8.2% to 7.7%. Goldman Sachs also cut its forecast for China’s growth rate next year from 5.6% to 5.2%.

The US think tank Paulson Institute stated, “Real estate and energy issues will also impact China’s fourth-quarter economic growth,” and predicted that “the annual growth rate this year will fall below 8%.”

However, Bloomberg pointed out that “even the most pessimistic forecasts see China’s growth rate this year at 7.5% or higher,” noting that “considering the size of China’s economy, this still represents rapid growth.” It added, “China has set a goal for its gross domestic product (GDP) to double by 2035 compared to 2020, which translates to an average annual growth rate of about 5%. This may be the lower bound of the growth rate that Chinese policymakers have in mind.”

Earlier, China’s National Bureau of Statistics announced on the 18th that the third-quarter GDP growth rate was 4.9%. This decline from 18.3% in the first quarter and 7.9% in the second quarter raised concerns about the slowdown in China’s economic growth. On the same day, Yi Gang, governor of the People’s Bank of China, projected the country’s economic growth rate for this year at 8%. According to calculations by Bloomberg Economics, an economic research institute under Bloomberg, achieving this forecast requires 3.9% growth in the fourth quarter.

This content was produced with the assistance of AI translation services.