Financial giants slash China’s GDP outlook

Two of the world’s biggest investment banks have slashed China’s economic growth forecast.

Goldman Sachs and Nomura both cited Covid-related lockdowns which curbed business and consumer activity in July.

Japanese financial holding company Nomura, which continues to maintain one of the lowest estimates for China’s growth, reduced its projection for gross domestic product growth to 2.8% from 3.3%. Meanwhile, Wall Street bank Goldman Sachs lowered its 2022 full-year forecast to 3.0% from 3.3%.

The financial majors cite weaker demand, an energy crunch, along with uncertainties stemming from China’s zero-Covid policy as primary reasons for the cuts that represent deepening gloom among investors about China’s growth target of around 5.5%. Last month, Beijing indicated it might miss its GDP goal for the year.

Earlier this week, China’s central bank slashed the key interest rate to help bolster growth, while local governments are expected to sell more bonds to boost spending. China currently faces production cuts in some parts of the country as one of the worst heat waves in decades continues straining an already stressed power supply.

“In contrast with some people’s concerns about too much policy stimulus in H2 [second half of the year], the real risk is that Beijing’s policy support may be too little, too late and too inefficient,” economists at Nomura said.

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