In a recent interview, economists shared insights from a survey conducted by Nikkei Economic Research, where 28 professionals weighed in on their expectations for China’s GDP in the third quarter of this year. They anticipate an annual growth of 4.6%, a figure that reflects apprehensions over deflation intensified by a sluggish real estate market and demonstrates a slight decrease from the 4.7% growth observed in the previous quarter.
With the National Bureau of Statistics of China scheduled to release preliminary third-quarter GDP figures on October 16, it’s worth noting that the last reported growth for the second quarter was 4.7%, contributing to an overall 5% growth in the first half of the year.
As reported by Nikkei Asia, the economists predict GDP growth for the July to September period could range between a high of 4.9% and a low of 4.3%. Notably, when adjusted for seasonal variations, the year-on-year increase shows a rebound to 1.1%, which is an improvement over the earlier forecast of 0.7% from April to June. However, the overarching outlook remains described as “more challenging.”
Looking ahead to 2024, the average GDP growth forecast from these economists sits at 4.8%, representing a slight drop of 0.1 percentage points from a previous survey in June, and remains just below the Chinese government’s target of approximately 5%.
Hidetaka Ito, chief economist at Mizuho Bank in China, expressed concerns that the real estate market will continue to struggle in the latter half of 2024. He emphasized that the slowdown in consumption, driven by the “negative asset effect,” is unlikely to reverse. Despite government efforts to stimulate the market, including measures aimed at encouraging the purchase of existing homes, he noted that these initiatives “have not been fully effective.”
The report highlighted that real estate accounts for about 70% of household assets in China, meaning that plummeting property values significantly undermine consumer confidence, which is directly tied to the negative asset effect.
Alex Muscatelli, an economist at Fitch Ratings, raised alarms about the growing “risk of deflationary pressures.” Meanwhile, Tetsuya Sano, chief Asia economist at Sumitomo Mitsui Trust Investment Management (Hong Kong), pointed out that “unless the government is willing to implement fundamental measures without budgetary restrictions, the sentiment surrounding deflation will not improve.”
Moreover, the report emphasized that China’s strategy of enhancing manufacturing exports to offset weak domestic demand is nearing its limits. This is exemplified by August’s industrial production index, which grew by only 4.5%, down from 5.1% in July.
On September 24, the People’s Bank of China (PBOC) introduced an unprecedented wave of easing measures, which included cuts to both the reserve requirement ratio and actual interest rates.
Recent reports from Reuters also suggest that China is preparing to issue approximately 2 trillion yuan (around 9 trillion New Taiwan dollars) in special national bonds to boost consumption. The survey conducted by Nikkei Economic Research took place prior to these developments, and economists indicated they might adjust their GDP growth estimates if these special bonds are officially announced.
The written survey, conducted in late September by Nikkei Economic Research and Nikkei QUICK News, targeted economists with expertise in China’s economy, resulting in responses from 28 individuals to inform their predictions for third-quarter GDP.
