S&P Global has revised its projection for China’s economic growth this year, emphasizing the uneven recovery from the pandemic and prompting calls for additional stimulus. The new forecast from S&P estimates China’s GDP growth to be 5.2% in 2023, down from the previous estimate of 5.5%. This marks the first instance in which a global credit ratings agency has lowered China’s forecast this year, following similar downward revisions by major investment banks such as Goldman Sachs.
S&P warns that China’s growth is at risk due to weak consumer confidence and a sluggish housing market, posing a challenge to the second-largest economy in the world. Despite the initial recovery after the relaxation of strict zero-COVID policies that were in place for three years, China has encountered a slowdown in recent months. Property investment has been on a decline, industrial output, and retail sales growth have fallen short of expectations, and youth unemployment has reached an all-time high of 20.8% in May.
Forecasts for China’s GDP growth in 2023 range between 4.4% and 6.2%. To bolster the economy, S&P suggests potential measures such as relaxing housing purchasing restrictions and mortgage down-payment requirements, expanding credit and infrastructure financing, and possibly providing fiscal support for consumption. China recently reduced its key lending benchmarks for the first time in ten months and the People’s Bank of China (PBOC) lowered short- and medium-term policy rates.
The state-controlled Global Times depicted a negative outlook on the economy, reporting that many graduates are resorting to visiting temples to pray due to mounting anxiety about job prospects. Anticipated market expectations indicate that stimulus policies are likely to be unveiled following a scheduled gathering of the Communist Party’s political bureau in the month of July. State media coverage is being expanded by the government to influence public sentiment ahead of the politburo meeting and build anticipation for potential stimulus measures.
Reflecting pessimism about the economy, both China and Hong Kong stocks experienced a decline on Monday following disappointing figures on domestic tourism during the recent three-day Dragon Boat Festival. Additionally, the yuan weakened against the dollar.