After experiencing rapid growth during the global pandemic, China’s exports have slowed down in recent months. Here is a photo of a wind turbine blade being loaded onto cargo ships at Yantai Port, Nov. 1, 2022.
Visual China Group – Getty Images| Visual China Group | Getty Images
BEIJING — Barclays cut its forecast for China’s economic growth next year to 3.8%, based partly on expectations of a drop in global demand for Chinese goods.
The U.S.-based and European economics departments of the firm forecast recessions next year,In a Wednesday report, Barclays’ Hong Kong-based Jian Chu and Yingke Zhang said.
The report stated that they now anticipate China’s trade to plummet by 2%-5% in 2023, contrary to their previous estimates of 1% growth.
The analysts stated that China’s share of global trade has been decreasing this year. “Foreign businesses are seen to have a greater share of global exports,” the analysts said. shifted their orders away from China to its Asian neighbors,For the production of key labor-intensive goods, India, Malaysia, Bangladesh, and Vietnam are all included.
China’s economy is still driven by exports, even though the pandemic caused disruption in global supply chains and created intense demand for electronic products and health products.
China’s exports increased by 29.8% last fiscal year in U.S. Dollar terms. This follows a 3.6% increase in 2020 according to the customs agent.
The pace of growth is slowing this year. The year-to date export growth was 12.5% at September.
China’s last drop in exports was in 2016, according to customs data.
Real estate drag
Barclays’ updated 2023 China GDP prediction of 3.8% has been reduced to 4.5% by September because of falling property investment.
Analysts’ most recent GDP cut includes an expectation for a steeper fall in real property investment, between 8%-10%, than previous forecasts that would have seen a decline of single-digits.
China’s realty sector and related industries account for about 25% of the country’s GDP. In the past two years, the property market has been in decline as Beijing took steps to reduce developers’ dependence on debt growth. consumer demand for buying houses has plunged.
China’s stringent Covid controls have impacted consumer sentiment and helped to propel stocks higher this week. Beijing has yet not made an official announcement regarding changes to its “dynamic, zero-Covid” policy.
High household debt
Barclays analysts stated that even if China is fully reopened, they are still cautious about the extent of recovery in the services and consumption sectors due to rising household debt.
They found that the ratio between disposable income and household debt in China has increased over the past few years. This is in contrast to what was seen in the U.S. prior to the 2008 financial crises.
The Barclays report stated that “our base case forecast assumes that no major stimulus announcement will be made, at least not before the December Central Economic Work Conference,” which is when the new administration will establish its policy priorities.
According to official data, China’s economy increased by 0.3% in the third quarter. 3% for the year so far.
This is below the official target of 5.5% but close to the lower expectations of 2022 investment banks.
Other banks reduce 2023 forecasts
Other analysts have reduced their projections for China’s GDP in the past few months.
Nomura has reduced its forecast from 5.1% to 4.3%. Ting Lu, China’s chief economist noted the impact of Covid and weaker exports. He also pointed out slow recovery in property. This was in addition to a softening market for auto after this year’s surge in passenger vehicle sales.
Goldman Sachs reduced its 2023 GDP forecast from 5.3% to 4.5% in September “considering China’s delayed rebound.”
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