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Workers load goods for export onto a crane at a port in Lianyungang, China’s Jiangsu province, 7 June 2019.
Reuters
BEIJING — International investment firms have revised their forecasts for China’s GDP almost every month so far this year, with JPMorgan making six adjustments since January.
That’s according to CNBC analysis of the firms’ notes. JPMorgan did not immediately respond to a request for comment.
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The U.S. investment bank recently cut its forecast for China’s GDP in July to 5% from 5.5% previously.
That came along with cuts this month by Citi and Morgan Stanley to 5%.
The average forecast among six companies studied by CNBC now stands at 5.1%, close to the “about 5%” target Beijing announced in March.
Citi’s latest forecast marks the company’s fourth change this year. Morgan Stanley has only revised its forecast once since it was set in January.
In the same period, Nomura changed its forecast four times, while UBS revised it three times and Goldman Sachs revised its forecast twice.
Investment banks mostly revised their forecasts upwards early this year following China’s initial recovery after three years of strict Covid controls.
Quarter-on-quarter revisions
The latest cuts come as recent economic data point to slower-than-expected growth and authorities’ reluctance to implement large-scale stimulus measures. Second-quarter GDP rose 6.3% from a year ago, missing the 7.3% growth analysts polled by Reuters had predicted.
However, the second-quarter GDP growth setback is due to official revisions to China’s quarter-on-quarter growth last year, according to Logan Wright and a team from Rhodium Group.
The resulting low number helps Beijing to gear up for economic support, the analysts said in a July 17 report. “Understand what you’re seeing in this year’s GDP data: These are artificially constructed narratives for different audiences, not reports on China’s economic performance.”
The National Bureau of Statistics did not immediately respond to CNBC’s request for comment.
Rather than releasing multiple data reads, the agency releases quarterly GDP relatively soon after the end of the period and then releases revisions.
The bureau of statistics has also made public statements about punishing local governments for falsifying data. The accuracy of official data in China has long been in question.
Goldman Sachs noted the seasonal revisions on Friday but maintained its 5.4% forecast for China’s growth. “On the web, we don’t think the surprises are consistent or large enough to significantly alter our growth forecast for China this year.”
Unofficial data
Researchers have looked for alternatives to measure growth.
One organization is the US-based China Beige Book, which claims to regularly survey companies in China to release reports on the economic environment.
Earlier this year, the company’s data “showed there was no wave of revenge spending or a bombastic recovery,” said Shehzad Qazi, New York-based director of China Beige Book.
“Wall Street’s predictions of blockbuster growth in China were first based on hype, then bolstered by China’s inflated GDP prints into early 2023.”
Qazi testified this month at a hearing before the US House Select Committee of the Chinese Communist Party.
Investment banking research is often referred to as the “sell side” because it is intended to educate buyers about financial products and company stocks.
In the case of China, Qazi pointed out that “investment banks are not only incentivized to sell a ‘China booming’ narrative, but given their business interests in China, they are also unwilling to publish views that could be perceived as critical of the Chinese economy.”
Institutional Predictions
The World Bank and the International Monetary Fund also regularly published economic forecasts for China and other countries. However, their reporting schedule means that forecasts may not fully reflect the current economic situation.
In June, the World Bank raised its forecast for China’s growth this year to 5.6%, up from 4.3% previously.
The International Monetary Fund raised its forecast for China’s GDP to 5.2% in April, up from 4.4% previously. This month, the spokesman noted that growth in China is slowing, saying an “updated forecast” would be reflected in the IMF’s next World Economic Outlook.
Chinese officials have stressed in recent weeks that the country is on track to meet its annual growth target of around 5%.
Of the six investment firms CNBC looked at, the highest China GDP forecast so far this year was JPMorgan’s 6.4% figure — when the bank corrected for the second time in April alone.
Overall, the range of the company’s forecasts was 1.4 percentage points, the most of any forecast in the CNBC analysis.
Looking beyond 2023
While businesses and investors have expressed uncertainty about China’s near-term economic trajectory, analysts expect growth in the world’s second-largest economy to continue to pick up over the longer term.
“Overall, there is evidence of a cyclical recovery in the Chinese economy in early 2024, even without any meaningful policy support in the second half of 2023,” the Rhodium analysts said.
They said given four quarters, a steady recovery in household consumption should help boost service sector employment, while industrial inventories are likely to need to be replenished over time.
JPMorgan, Citi, Goldman have cut their forecasts for China’s GDP a few times this year
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