S&P Global, a leading credit ratings agency, has revised its forecast for economic growth in China this year, highlighting the uneven recovery of the country after reopening and prompting calls for additional stimulus measures. The agency now predicts that China’s GDP growth for 2023 will reach 5.2%, down from its previous estimate of 5.5%. This marks the first downward revision by a global credit ratings agency this year, following similar reductions made by major investment banks such as Goldman Sachs.

Weak Consumer Confidence and Housing Market Impact China’s Growth

S&P Global stated that China faces a significant downside risk to its growth, primarily stemming from weakening consumer confidence and the housing market. The country’s economic momentum has slowed in recent months, despite a resurgence after the removal of three years of strict zero-COVID policies. Notably, property investment experienced a further decline, while industrial output and retail sales growth failed to meet expectations. Additionally, youth unemployment reached a record high of 20.8% in May.

Diverse Forecasts for China’s GDP Growth

Various institutions provide a range of forecasts for China’s GDP growth this year, spanning between 4.4% and 6.2%. These disparities indicate the complexity and uncertainty surrounding the country’s economic trajectory.

Potential Measures to Bolster the Economy

S&P Global suggests several potential measures to strengthen China’s economy, including easing housing purchasing restrictions and mortgage down-payment requirements, expanding credit and infrastructure financing, and potentially providing fiscal support for consumption. Policy advisers, including Ning Jizhe, a senior economic official and former head of China’s statistics bureau, also advocate for the implementation of additional supportive measures. Jizhe emphasizes the importance of acting sooner rather than later, stressing that the impact of these measures should be significant.

Stimulus Measures Already Implemented

China has already taken steps to stimulate its economy. Recently, the country reduced its key lending benchmarks for the first time in ten months. Prior to that, the People’s Bank of China (PBOC) lowered short- and medium-term policy rates. Sources involved in policy discussions have indicated that further stimulus measures will be rolled out throughout the year. Notably, state-run securities newspapers published front-page articles suggesting that the PBOC will likely ease monetary policy even further. Expectations are high for stimulus policies to be announced after a regular meeting of the Communist Party’s political bureau in July.

Concerns Over China’s Economy Mount

State-controlled Global Times has painted a bleak picture of the Chinese economy, reporting rising anxiety among graduates over job prospects. The publication highlighted the trend of graduates visiting temples to pray amid these concerns. As a result, both Chinese and Hong Kong stocks experienced a slump on Monday, triggered by disappointing domestic tourism figures for the recent three-day Dragon Boat Festival. Furthermore, the yuan weakened against the dollar, adding to the pessimistic sentiment surrounding China’s economic outlook.

Anticipation of Additional Stimulus Measures

Market analysts widely anticipate the announcement of further stimulus policies following the political bureau meeting in July. State media is actively preparing public opinion and raising expectations for these measures. Nie Wen, an economist based in Shanghai, noted that the government is encouraging calls for stimulus through state media, setting the stage for the upcoming meeting and fostering public anticipation.

In conclusion, S&P Global’s downward revision of China’s economic growth forecast underscores the challenges faced by the country’s post-reopening recovery. Weakening consumer confidence and the housing market pose significant risks to China’s growth. To mitigate these challenges, S&P Global and policy advisers recommend implementing various stimulus measures. China has already taken steps in this direction, and market expectations for further stimulus are high. However, concerns over the economy persist, as evidenced by recent market fluctuations and anxieties

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