Wall Street cut China’s GDP forecast many times this year. One bank adjusted 6 times

BEIJING
–
International
investment
firms
have
changed
their
China
GDP
forecasts
nearly
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.

related
investing
news

7
hours
ago

The
U.S.
investment
bank most
recently
cut
its
China
GDP
forecast in
July to
5%,
down
from
5.5%
previously.

That
came
alongside
cuts
this
month
by
Citi
and
Morgan
Stanley
to
5%.

The
average
prediction
among
six
firms
studied
by
CNBC
now
stands
at
5.1%,
close
to
the
“around
5%”
target
Beijing
announced
in
March.

Citi’s
latest
forecast
marks
the
firm’s
fourth change this
year. Morgan
Stanley
has
only
adjusted
its
forecast
once
since
it
was
set
in
January.

During
that
same
period, Nomura
changed
its
forecast
four
times,
while
UBS
adjusted
it
three
times
and
Goldman
Sachs
changed
forecasts
twice.

The
investment
banks
mostly
revised
their
forecasts
higher
early
this
year
after
China’s
initial
rebound,
following
three
years
of
strict
Covid
controls.

The
latest
cuts
come
as
recent
economic
data
point
to
slower
growth
than
expected,
and
authorities
show
little
inclination
to
embark
on
large-scale
stimulus. Second-quarter
GDP
rose
by
6.3% from
a
year
ago,
missing
the
7.3%
growth
that
analysts
polled
by
Reuters
had
predicted.

The
disappointment
in
second-quarter
GDP
growth,
however,
is
due
to
official
revisions
to
China’s
quarter-on-quarter
growth
last
year,
according
to
Rhodium
Group’s
Logan
Wright
and
a
team.

The
resulting
low
figure
helps
Beijing
make
a
case
for
supporting
the
economy,
the
analysts
said
in
a
July
17
report.
“Understand
what
you
are
seeing
in
this
year’s
GDP
data:
these
are
artificially
constructed
narratives
for
various
audiences,
not
reports
on
China’s
economic
performance.” 

The
National
Bureau
of
Statistics
did
not
immediately
respond
to
CNBC’s
request
for
comment.

Instead
of
releasing
multiple
reads
of
data,
the
bureau
discloses
quarterly
GDP
relatively
soon
after
the
end
of
the
period,
and
subsequently
issues
revisions.

The
statistics
bureau
has
also
issued
public
statements
about
punishing
local
governments
for
falsifying
data.
The
accuracy
of
official
data
in
China
has
long
been
in
question.

Goldman
Sachs
on
Friday
noted
the
seasonal
revisions,
but
maintained
its
5.4%
forecast
for
China’s
growth.
“On
net,
we
do
not
think
the
surprises
are
either
consistent
or
large
enough
for
us
to
make
major
adjustments
to
our
China
growth
forecast
this
year.”

Researchers
have
sought
alternatives
to
gauge
growth.

One
organization
is
the
U.S.-based
China
Beige
Book,
which
claims
to
regularly
survey
businesses
in
China
in
order
to
put
out
reports
on
the
economic
environment.

Earlier
this
year,
the
firm’s
data
“showed
there
was
no
revenge
spending
wave
or
a
bombastic
recovery,”
said
Shehzad
Qazi,
New
York-based
managing
director
at
China
Beige
Book.

“Wall
Street’s
predictions
of
blockbuster
growth
in
China
were
first
based
on
hype,
and
then
juiced
up
by
China’s
inflated
GDP
prints
into
early
2023.”

Qazi
testified
this
month
at
a
hearing
of
the
U.S.
House
Select
Committee
on
the
Chinese
Communist
Party.

Investment
bank
research
is
often
known
as the
“sell-side,” since
it
is
meant
to
inform
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’
story,
but
given
their
business
interests
in
China,
they
are
also
unwilling
to
publish
any
views
that
can
be
seen
as
critical
of
China’s
economy.”

The
World
Bank
and
International
Monetary
Fund
also
put
out
regular
economic
forecasts
for
China
and
other
countries.
However,
their
reporting
schedule
means
that
predictions
may
not
fully
match
current
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
in
April
raised
its
forecast
for
China’s
GDP
to
5.2%,
up
from
4.4%
previously.
This
month,
its
spokesperson
noted
that
growth
was
slowing
in
China,
and
said
an
“updated
forecast”
would
be
reflected
in
the
IMF’s
next
World
Economic
Outlook.
 

Chinese
officials
have in
the
last
several
weeks
emphasized
the
country
is on
track
to
reach
its
annual
growth
target
of
around
5%.

Among
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
adjusted
for
the
second
time
in
April
alone.

In
all,
the
range
of
the
firm’s
forecasts
have
spanned
1.4
percentage
points,
the
most
of
any
of
those
in
the
CNBC
analysis.

Although
businesses
and
investors
have
expressed
uncertainty
about
China’s
near-term
economic
trajectory,
analysts
expect
growth
in
the
world’s
second-largest
economy
will
still
pick
up
in
the
longer
term.

“Overall,
there
is
a
case
emerging
for
a
cyclical
rebound
in
China’s
economy
in
early
2024,
even
without
any
meaningful
policy
support
in
the
second
half
of
2023,” the
Rhodium
analysts
said.

They
said
that
given
four
quarters,
a
steady
household
consumption
recovery
should
help
boost
service
sector
employment,
while
industrial
inventories
will
likely
need
restocking
down
the
road.