Goldman Sachs Cuts China Growth Forecast While Experts Predict Beijing’s Stimulus Measures Will Be Ineffective

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Goldman Sachs has become the latest Wall Street bank to cut its growth forecast for China, as the world’s second-largest economy continues to lose momentum with persistently weak confidence.

Experts believe the Chinese communist regime’s stimulus measures to remedy this won’t be effective due to macroeconomic issues.

Goldman Sachs’s analysts lowered China’s 2023 gross domestic product (GDP) growth forecast from 6 percent to 5.4 percent. They also lowered China’s 2024 growth forecast from 4.6 percent to 4.5 percent.

In a research note, Goldman Sachs’ chief China economist Hui Shan and others have warned that the Chinese economy is facing a series of macroeconomic problems and that the future may be more turbulent.

“With continued challenges from the property market, pervasive pessimism among consumers and private entrepreneurs, and only moderate policy easing to partially offset the strong growth headwinds, we mark down our 2023 real GDP forecast,” said Sunday’s research note.

Before Goldman Sachs lowered China’s full-year GDP forecast, institutions such as UBS, Bank of America, Standard Chartered Bank, JPMorgan Chase, and Nomura Holdings also lowered their growth forecasts for China.

Goldman Sachs’ economists identified a series of macroeconomic problems China faces.

“With the reopening boost quickly fading, medium-term challenges such as demographics, the multi-year property downturn, local government implicit debt problems, and geopolitical tensions may start to become more important in China’s growth outlook,” the research note said.

On Friday, UBS also anticipated that the Chinese economy will continue to be weak.

Stimulus Measures Won’t Work

The Statistics Bureau of the Chinese communist regime published on June 15 that the total retail sales in May, a key indicator of consumer confidence, increased by 12.7 percent year-on-year, which was significantly lower than the 18.4 percent in April, and fell by 5.7 percentage points, which was weaker than expected.

In May, the added value of industrial enterprises increased by 3.5 percent year-on-year, lower than the 5.6 percent in April, a sharp drop of 2.1 percentage points.

Paramilitary policemen patrol in front of the People’s Bank of China, the central bank of China, in Beijing on Jul. 8, 2015. (Greg Baker/AFP via Getty Images)

The Official statistics also show that from January to May this year, real estate investment plummeted 7.2 percent. New housing construction fell 22.6 percent year-on-year, a sharper decline than the previous four months’ rate (21.2 percent).

Goldman Sachs said that Beijing would make further stimulus measures but noted that they are insufficient to overcome its problems. The regime has been cutting interest rates but hasn’t achieved any effect.

Drop in Demand

Tsai Mingfang, a professor at the Department of Economics at Tamkang University, told The Epoch Times that “there is a sharp drop in demand in China, which is what’s called deflation.”

“The demands have disappeared in consumer goods and retail, as well as investment and real estate development,” Tsai said.

Chu Yuechong, an assistant professor at the Finance Department of Southern Taiwan University of Science and Technology, told The Epoch Times that the easiest measure that the Chinese Communist Party (CCP) uses is to print money, but this causes a worsening of the fiscal deficit from the local to the central government.

Tsai believes that Beijing will have fewer measures to make use of. “The reason is that when using these economic measures, such as lowering interest rates, it may be effective at the beginning, but China has been cutting interest rates, and its economy continues to decline, and its exports also continue to decline,” Tsai said.

Cheng Jing and Luo Ya contributed to this report.