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26/06/2023 17:42

S&P cuts China GDP forecast as calls for stimulus intensify

S&P Global has revised its forecast for economic growth in China downward, highlighting the uneven nature of the country's recovery following the lifting of COVID-19 restrictions.

The credit ratings agency now predicts a GDP growth rate of 5.2% in 2023, down from its previous estimate of 5.5%. This marks the first such revision by a global credit ratings agency this year, following similar downward revisions by major investment banks like Goldman Sachs.

S&P cited weak consumer confidence and a sluggish housing market as key factors contributing to the downside risk in China's growth. Property investment, industrial output, and retail sales growth have all fallen short of expectations in recent months, and youth unemployment has reached a record high of 20.8%.

In response to the slowdown, S&P suggested potential measures to stimulate the economy, such as relaxing housing purchasing restrictions and mortgage down-payment requirements, expanding credit and infrastructure financing, and providing fiscal support for consumption. Ning Jizhe, a senior economic official and former head of China's statistics bureau, echoed the call for additional supportive measures, emphasizing the need to act sooner rather than later. China has already implemented some stimulus measures, including cutting key lending benchmarks and reducing short- and medium-term policy rates.

Sources involved in policy discussions have indicated that China will introduce more stimulus throughout the year. Three state-run securities newspapers recently published articles suggesting that the People's Bank of China (PBOC) is likely to further ease monetary policy. Additionally, there are expectations that stimulus policies will be announced following a regular meeting of the Communist Party's political bureau in July. The state-controlled Global Times reported on rising anxiety among graduates regarding job prospects, with many resorting to visiting temples to pray, indicating the challenges faced by the economy.