A series of banks lowered their growth forecasts for China.

Goldman Sachs, JPMorgan, UBS lower China GDP growth forecast to near 5%, following dismal economic data last month.

Goldman Sachs on June 18 lowered its forecast for China's GDP growth from 6% to 5.4%. The pace for next year was also cut from 4.6% to 4.5%. Goldman Sachs believes that China's economy is increasingly constrained by a shrinking population, rising debt and authorities curbing real estate speculation.

Previously, a series of other banks also lowered their growth forecasts for China after the pessimistic economic data in May, from retail sales to fixed asset investment. Nomura Holdings forecast China's GDP to grow by only 5.1%. UBS said the rate was 5.2%. Standard Chartered expected a growth of 5.4%. JPMorgan lowered from 5.9% to 5.5%.

“Nowhere has the recovery momentum from reopening been as rapid as China. We expect the challenges to growth to persist. Officials are still weighing many economic and political factors to come up with the right stimulus,” said Hui Shan, an analyst at Goldman Sachs.

The Chinese government has set a growth target of 5% this year – the lowest in more than 30 years, after missing last year’s target. Chinese media reported that officials met over the weekend to discuss ways to stimulate growth.

Economists say that as authorities continue to clamp down on property speculation, the scale of this stimulus will be smaller than previous ones. China has previously increased investment in infrastructure and real estate to boost growth.

This time, economists predict China will use fiscal measures, such as increasing bond issuance quotas for local governments, requiring policy banks to increase lending, or the government to issue special-purpose bonds.

A few days ago, the People’s Bank of China (PBOC) also unexpectedly cut a series of short-term interest rates. This move represents a change in the government’s stance, showing that officials are increasingly concerned about the economic downturn.

Ha Thu (according to Bloomberg, Reuters)

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