Even with 195 Trillion Won Poured In... China's Growth Rate Forecasted to Decline in Q3 Next Year

Economic Experts Quarterly Forecast Survey
"Below Expectations" Distrust in Stimulus Measures
Urgent Need for Real Estate Recovery and Easing of Lockdown Measures

Citizens are walking on Nanjing East Road, the largest downtown area in Shanghai, China. [Image source=Yonhap News]

Recently, China has launched an economic stimulus policy worth 1 trillion yuan (approximately 195 trillion won), but economic growth is expected to fall short of expectations until the third quarter of next year.

According to a quarterly forecast survey conducted by Bloomberg on the 29th (local time) targeting economists, China's economic growth forecast for next year is expected to remain at 5.2%, the same as the previous estimate. However, Bloomberg reported that economic growth is expected to underperform expectations by 0.1 to 0.4 percentage points (p) from the first to the third quarter of next year.

This year’s economic growth rate is predicted to be 3.5%, far below the 5.5% initially set by the Chinese government. Investment banks Goldman Sachs and Nomura Securities have revised their growth forecasts downward to around 3%, even lower than this. Goldman Sachs lowered its economic growth forecast from 3.3% to 3.0%, while Nomura Securities reduced its forecast from 3.3% to 2.8%.

Bloomberg noted that these survey results suggest that economists do not trust China’s stimulus measures. Previously, the Chinese government announced a stimulus package worth about 1 trillion yuan and cut the one-year Loan Prime Rate (LPR), which serves as the benchmark interest rate, from 3.70% to 3.65%. Concerns grew that the real estate crisis could spread into a financial crisis as apartment construction was halted due to the recession, and debtors began refusing to repay mortgage loans.

However, economic experts still observe that China’s economic outlook remains bleak as the real estate market slump and COVID-19-related regulatory risks have not been resolved. Brendan McKenna, an economist at the U.S. investment bank Wells Fargo, explained, "The real estate market is struggling, and there are risks related to new COVID-19 regulations. This year’s economic growth is expected to slightly exceed 3%, but if these conditions persist, growth could fall below that."

In addition to the current problems China faces, there is also a forecast that the rapid aging population will become an obstacle to economic growth. Raymond Yang, chief economist at Australia and New Zealand Banking Group, stated, "Due to the increasing elderly population, China’s economic growth rate will remain below 5% for several years. With no productivity improvements, the potential growth rate is slowing, and economic growth is projected at 4.2% next year and 4.0% in 2024."

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