High-profile banks express cautious optimism about China’s economic growth. Leading Wall Street banks — Goldman Sachs, JPMorgan, and Morgan Stanley — have downgraded their forecasts for China’s GDP almost simultaneously. An unexpected slowdown in the exports growth rate triggered by rising coronavirus concerns made the banks review their outlooks.
In June, the Chinese export surged by 32.2%. Experts did not expect the reading to stay firm at this level in July. At the same time, nobody could have thought that exports might plunge. As a result, China’s export showed quite a modest 19.3% rise in July after reaching a record high in June. Under the circumstances, the leading US banks had to review their growth forecasts for China. JPMorgan downgraded its outlook for China’s Q3 GDP to 2.0% from 4.3%. It also expects the economy to expand by 8.9% versus 9.1% on a yearly basis. Morgan Stanley sees China’s GPD growth now at 1.6% in the third quarter. Goldman Sachs reviewed its quarterly outlook downward to 2.3% versus 5.8% earlier and lowered its annual estimate to 8.3%.
According to JPMorgan analysts, recent events indicate that the already moderate third-quarter growth forecasts risk being reviewed downwards even more due to the spread of the Delta variant. Regulatory changes in new economic sectors and a decline in market sentiment are also viewed as risks. At the same time, the Chinese government is believed to take all necessary measures to support the economy.
Morgan Stanley expects the Chinese government to at least cut interest rates. The investment bank reckons that a moderate decrease in export in the last six months of the year and a slowdown in domestic demand amid the spread of the Delta variant may urge China to increase support in the coming months.
