Global Banks Cut China’s 2024 Growth Outlook After Weak GDP Data

This photo taken on June 6, 2024 shows people crossing a street at the Huangpu district in Shanghai. Hector Retamal /AFP via Getty Images

Global investment banks cut their growth forecasts after China reported its slowest economic growth in five quarters, casting a shadow over one of the Chinese Communist Party’s (CCP’s) most important political meetings.

China’s economy grew by 4.7 percent in the second quarter compared to the previous year, slowing from 5.3 percent growth in the first quarter, according to data released by the National Bureau of Statistics on July 15.

The reading marks the slowest economic growth since July 2023, piling pressure on the regime to introduce measures to boost market confidence as senior Party officials convened in Beijing on July 15 for the four-day conclave known as the Third Plenum.

The July 15 data led several major investment banks to lower their growth forecasts.

JPMorgan reduced its full-year outlook to 4.7 percent from 5.2 percent, and said China’s second quarter and June data indicates that economic activity remains “fragile, unstable, and uneven.”

A research note from Societe Generale described China’s economy as suffering “severe imbalances,” with “very depressed” domestic demand and a “highly deflationary” policy mix.

Goldman Sachs revised its full-year gross domestic product (GDP) growth forecast for China to 4.9 percent from 5 percent, although it raised its 2025 forecast to 4.3 percent from 4.2 percent.

The investment bank in a note on July 15 said it saw significant divergences in China’s economy, highlighting still-depressed property activity. Its economists said “more policy easing is necessary through the remainder of this year,” especially “on the fiscal and housing fronts.”

Australian bank ANZ stated that the weak second-quarter GDP indicates the official 5 percent growth target for 2024 is “not a done deal.” They maintained their forecast of 4.9 percent growth for China this year.

Economic Data

Growth missed the consensus forecast of 5.1 percent growth by 30 economists in a Nikkei poll, as well as analysts in separate surveys by Reuters and Bloomberg. It also was below the AFP forecast of 5.3 percent.

Quarter-on-quarter, GDP expanded by 0.7 percent in the April-to-June period, falling short of the expected 1.1 percent increase and less than a revised 1.5 percent rise in the previous quarter.

Domestic demand remains weak. Retail sales of consumer goods, a key indicator of household spending, rose only 2 percent year-on-year in June, down from a 3.7 percent increase in May.

In May, the CCP introduced measures to stimulate the real estate market, including lowering downpayment ratios, reducing housing provident fund loan interest rates, and purchasing unsold residential units for public housing.

Despite these policies, the market remains sluggish. According to the latest official Chinese regime data, investment in real estate development fell by 10.1 percent in the first half of the year. The sales area of new homes dropped by 19 percent, and the sales value of new commercial housing decreased by 25 percent.

In June, the prolonged property crisis worsened as new home prices dropped at the fastest rate in nine years, weakening consumer confidence and restricting local governments from raising more funds through land sales.

David Huang, a U.S.-based economic commentator, said the overall situation is a downward spiral with no signs of improvement.

“It will likely take some time to reach the bottom,” he said.