JP Morgan, ANZ raise China GDP forecast

JP Morgan and ANZ on Friday raised their 2023 economic growth forecast for China, after August economic numbers offered some signs of stabilisation in the world's second-largest economy.

Both raised their GDP forecast by 20 basis points each to 5 percent and 5.1 percent respectively, with JPM saying notable recovery in retail sales and rise in service activity were the biggest surprises.

China's factory output and retail sales grew at a faster pace in August, but tumbling investment in the crisis-hit property sector threatens to undercut a flurry of support steps that are showing signs of stabilising parts of its wobbly economy.

Haibin Zhu, economist at JPM, said that government growth-stabilization policies announced since mid-August have been incremental but extensive, and will likely seep into the real economy in the coming months.

A worker operates machines at a textile factory in Nantong, in eastern China’s Jiangsu province, on September 14. China’s factory output and retail sales grew at a faster pace in August, but tumbling investment in the crisis-hit property sector threatens to undercut a flurry of support steps. Photo: AFP

Zhu said additional fiscal and housing policy relaxation like subsidy for product-specific consumption support, relaxation of home buying restrictions, sales restrictions and price controls in tier-1 and 2 cities may follow in the near term.

"On the cautious side, while demand-side easing in the housing market is a welcome step, real estate investment will likely remain sluggish," JPM said.

Goldman Sachs kept its third-quarter GDP growth forecast unchanged at 4.9 percent but said China's economy is still in a tug of war between persistent growth headwinds and increasing policy support.