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Nomura lowers China’s GDP forecast as the power crisis slows growth

On September 15, 2021, workers are manufacturing adhesive tapes for flexible printed circuits (FPCs) at a factory in Yangcheng, Esu Province, eastern China.

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BEIJING — Nomura’s Chief China Economist, Ting Lu, has lowered China’s GDP growth forecast this year as factories are closed to comply with carbon emission reduction targets.

“The market is currently so confused by the decline of the real estate sector that it could ignore unprecedented restraints on Beijing’s energy consumption and energy intensity,” Lou said in a memo on Friday.

As a result, he expects China’s GDP to increase by 7.7% this year, down from the previous forecast of 8.2%.

China’s President Xi Jinping announced in September 2020 that China Peak carbon emissions will be reached by 2030 and will be carbon-neutral by 2060..It started national and local planning Reduce coal production And other carbon-rich processes.

in the meantime, Worry about the Chinese real estate giant who is indebted Ever Grande Floating abilities made a noise in the global market last week. The real estate market, along with related industries such as construction Accounts for more than a quarter of China’s GDPAccording to Moody’s estimate released in a report in late July.

Fitch lowered China’s growth forecast from 8.4% to 8.1% on Thursday, expecting a slowdown in the real estate market to put pressure on domestic demand.

Other economists have not yet reduced China’s GDP forecast for 2021, but have noted that it is increasing the stumbling block to growth.

  • McColley’s Chief China Economist, Larry Foo, said in an email Monday that the 8.5% GDP estimate set a year ago “is now facing downside risks given the slowdown in real estate and reduced production. “.
  • Bruce Pan, head of macro and strategic research at China Renaissance, said Monday that the company’s GDP forecast of 8.4% hasn’t changed yet. However, he said, a prolonged power shortage could be downgraded to 8.25% or 8.3%, as it would hurt local life and services as well as energy-intensive industrial production.
  • Françoise fan, senior economist at Allianz’s subsidiary Euler Hermes, said in an interview Thursday. [a] You need to make a “downward revision”.

In March the central government Much lower GDP target of 6% or more expansion One year period.Analysts, policy makers Much more interested in the quality of economic growth From that pace.

“Because Beijing has a huge impact on both the supply and demand sides, it is unrealistic to expect China to maintain high and stable growth,” Nomura said in a report on Friday. I have. “

Power crunch

On the supply side, he pointed to the “game changer” in mid-August. National Economic Planning Agency announced 20 regions It accounts for about 70% of China’s GDP — the failure to meet its carbon-related goals has led local governments to take immediate action.

“As for the demand shock,” Lu said.China’s recent drastic crackdown on regulations Fintech, video games, off-campus instruction, ride hailing, data privacy, food delivery, crypto miners, and electronic cigarettes were important on Internet platforms. NS Crackdown on off-campus guidance Growth in the third and fourth quarters of this year can be particularly negative as the entire sector is declining. “

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He lowered his quarterly GDP forecast to 4.7% year-on-year in the third quarter and 3% in the fourth quarter.

China’s official announcement of GDP for the third quarter is scheduled for October 18. The accuracy of government data is often questioned.

Ripple from Evergrande and real estate

Last year, Chinese authorities’ efforts to reduce their high reliance on debt in the large real estate sector caused the stake in debt developer China Evergrande to fall.The company remains Silence about $ 83 million interest payments on US dollar denominated debt It was scheduled for Thursday. The company has a 30-day grace period.

If Evergrande’s troubles cause a 10 percentage point slowdown in residential real estate activity, which could reduce GDP growth by about 1 percentage point, Morgan Stanley’s Chief Asian Economist Chetan Ahiya said in a note on Sunday. He quoted an analysis of the company’s chief China economy strobincin.

Ahya added that the slowdown could reduce personal consumption, reduce real estate investment, and then reduce fixed asset investment in related manufacturing sectors. “These spillover effects are creating downward pressure on growth at the same time that production cuts to reach energy intensity targets are squeezing growth,” Aya said. “Regulatory resets are focused on corporate sentiment, and consumption is softening due to intermittent Covid-related restrictions.”

If constraints on energy-intensive production remain, Morgan Stanley analysts expect GDP growth to decline by about 1 percent in the fourth quarter. Investment banks are currently forecasting GDP growth in the third quarter to be 4.5% slower than a year ago and a pace slowing in the fourth quarter by 4%.

Expect policy support

As the negative factors increase, analysts expect Chinese authorities to ease policy and support growth.

“The government hasn’t relaxed its policies because the financial pressure isn’t high enough,” Jiwei Chan, chief economist at Pinpoint Asset Management, said in a note on Sunday. “In particular, the unemployment rate is relatively stable and export growth is strong. The government may think it can afford to relax its policies until the end of the year,” he said.

He said overseas markets are less worried about the hard landing of the Chinese economy compared to the previous decline in the MSCI China Index.

According to Zhang, this year’s inventory decline has not affected the original exchange rate. “three [is] No signs of capital outflow, gap between offshore [yuan] Exchange rates and land exchange rates did not increase. This shows that the current Evergrande case has not caused a panic in China’s macro economy in the international market. “

The MSCI China Index has fallen by more than 18% so far this year.Track stocks of Chinese companies trading in the mainland, Hong Kong and the United States

Sources of offshore trading have fallen by about 0.66% so far this year. According to Wind Information, the gap with the yuan traded on land remains within the absolute value of 0.043 yuan.

Nomura lowers China’s GDP forecast as the power crisis slows growth

Source link Nomura lowers China’s GDP forecast as the power crisis slows growth

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