Goldman Sachs has revised its forecast for China’s economic growth this year, increasing it from 4.7% to 4.9% following a series of economic stimulus measures introduced by the Beijing authorities. They have also raised their growth prediction for next year from 4.3% to 4.7%.
UBS has commented that if the fiscal stimulus measures are effectively implemented, along with government support for the real estate market, China’s GDP growth could come closer to the 5% target this year.
Goldman Sachs highlighted that the latest round of stimulus measures clearly indicates that policymakers have shifted towards a cyclical approach to policy management, intensifying their focus on the economy. This increase in the growth forecast is largely attributed to the Chinese Ministry of Finance’s announcement of the use of 2.3 trillion yuan (approximately $325.45 billion) in special local government bonds for this year. Additionally, the National Development and Reform Commission stated that it will approve an investment quota of 200 billion yuan (about $28.3 billion) for construction projects by the end of the month.
Moreover, Goldman Sachs has adjusted its growth forecast for next year from 4.3% to 4.7%. However, they cautioned that as domestic economic data and policy events evolve, coupled with the upcoming U.S. elections, further adjustments to these forecasts might be necessary in the coming weeks.
UBS also noted that the Chinese Ministry of Finance outlined its anticipated fiscal support policies at a press conference last Saturday. Although the Ministry did not disclose the exact scale of the stimulus measures, stating that further details will come after legal procedures are completed (such as approval by the National People’s Congress), the meeting did offer some specific figures and provided a positive forward-looking guideline.
Wang Tao, the head of Asia Economic Research and chief Chinese economist at UBS Investment Bank, mentioned that the two forward-looking guidelines from the Ministry of Finance aim to boost market confidence and stabilize economic growth. These include a significant increase in debt replacement limits to address local government hidden debts and support for local governments to use special bonds to stabilize real estate activities, including efforts to reduce inventory.
Additionally, the Chinese Ministry of Finance has indicated that there is ample room to increase borrowing and raise the deficit in the central finances. This suggests that if necessary, the fiscal deficit could be increased, and more incremental fiscal stimulus measures could be introduced in the future.
