On October 21, JPMorgan Chase announced that China’s economic growth for the third quarter rose to 4.6%, slightly above the bank’s expectations. As a result, they have adjusted their forecast for China’s annual economic growth to 4.8%. Similarly, UBS has also revised its full-year economic growth projection for China to 4.8%.
In an interview with the Hong Kong Economic Journal, Haibin Zhu, JPMorgan’s Chief Economist for China and Head of Greater China Economic Research, noted that economic activity in China strengthened towards the end of the third quarter. He highlighted that domestic activity indicators in September generally exceeded market expectations. Significant increases in industrial output and retail sales were observed, partially attributed to recent policies promoting the trade-in of old vehicles and home appliances, as well as measures supporting equipment upgrades in the corporate sector. However, Zhu pointed out that disparities in economic activities across different industries remain pronounced, with the strong industrial output in September linked to growth in high-tech manufacturing and a recovery in electrical equipment production, while construction-related sectors performed poorly.
Zhu also mentioned that the recently announced fiscal measures primarily focus on risk alleviation, particularly addressing issues like local government hidden debts, housing, and banking. However, he indicated that the remaining fiscal resources for the fourth quarter appear to be larger than previously expected, prompting an upward revision of their GDP growth forecast for the fourth quarter due to the proactive deployment of special local government bond funds.
Looking ahead, Zhu anticipates that China’s fiscal and monetary policies will continue to support growth next year, with the fiscal deficit projected to expand to 12.4% of GDP, an increase of 0.5 percentage points from this year. Furthermore, he expects the People’s Bank of China to cut interest rates twice next year, by 0.1% each time, as well as to lower the reserve requirement ratio twice, by 0.25% each time.
In a report by Ming Pao, Wang Tao, Head of Asia Economic Research and Chief China Economist at UBS, stated that in light of the stronger-than-expected year-on-year GDP growth in the third quarter, coupled with a recent series of supportive policies from the government, they have revised their forecast for China’s full-year actual GDP growth in 2024 to 4.8%. He added that fiscal support might extend into early 2025, with credit growth expected to rebound, leading UBS to increase its 2025 actual GDP growth forecast to 4.5%, up from the previous estimate of 4.0%.
