In the latest developments, China’s pursuit of a 5% economic growth target for the year 2023 faces significant challenges, primarily attributed to an ongoing property crisis, according to a comprehensive analysis by Bloomberg. While a Bloomberg survey suggests that China might barely meet this economic target, experts remain wary due to mounting pressures within the real estate sector.
The survey, conducted among 78 economists, anticipates a 5% expansion for the Chinese economy in 2023, indicating a slight 10 basis point downgrade from previous projections. The property sector looms large as the most formidable obstacle to China’s growth prospects, with concerns regarding mounting debt and enduring challenges.
Analysts at Poseidon Partner, a Hong Kong-based investment firm, underscored the persistent pressure on the real estate sector, even in the face of government efforts to stabilize the property market. They predict that entities burdened with past debts will continue to experience adverse consequences.
Bloomberg Economics’ research, coinciding with the economist survey, presents a cautious optimism that the “around 5%” growth goal is still within reach but not without uncertainties. They estimate an 18% probability of falling short of this target.
Economists Chang Shu and Andrej Sokol, in a recent report, articulated concerns regarding the property slump, fragile market sentiment, and mounting corporate debt stress, which could potentially push the economy onto a lower growth trajectory. Their projection for gross domestic product (GDP) growth stands at 5.4% for the year.
Notably, HSBC Holdings Plc, Morgan Stanley, and Citigroup Inc. have already predicted sub-5% growth for China in 2023. HSBC, for instance, recently revised its forecast from 5.3% to 4.9%.
While there are some positive signs, such as an easing drop in exports and improved credit growth, the housing market remains a source of concern. A housing rally in major cities has begun to lose momentum, raising questions about the effectiveness of targeted government support.
The property crisis emerges as the paramount challenge facing China, as indicated by a separate survey, where 17 out of 21 economists named “real estate” as the top concern. Some experts believe that housing sales may continue to decline into the early part of the following year, potentially taking up to a year for a substantial recovery.
Former central bank adviser Li Daokui has urged Beijing to facilitate more lending to developers to avert further defaults and expedite the property market’s recovery. While larger cities may see quicker growth, smaller cities may require more time to achieve a “good recovery.
The property crisis remains a critical factor influencing China’s economic outlook for 2023, with uncertainty persisting despite recent positive economic indicators. Policymakers continue to navigate these challenges carefully, implementing fiscal and monetary support measures to bolster the economy, but recognizing that time may be needed for their full impact to materialize.
Other Key Findings from the Bloomberg Survey:
– China’s GDP is expected to grow by 4.3% year-on-year in the third quarter and 4.8% year-on-year in the fourth quarter of 2023.
– Growth in 2024 is forecasted to remain at a 4.5% year-on-year expansion.
– Economists anticipate a 10 basis point reduction in China’s one and five-year loan prime rates by the end of the year.
– Producer prices are expected to contract by 2.9% for the full year, a slight improvement from the previous estimate of a 3% decline.
– Exports are likely to decline by 4.2% in 2023, while imports are projected to decline by 5.6% for the year.