Barclays cuts China GDP after forecasting U.S., Europe recession

China’s export growth has slowed in recent months after accelerating during the height of the global pandemic. Pictured here is a wind turbine blade being loaded onto a cargo ship at Yantai port on November 1, 2022.

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BEIJING – Barclays cut its forecast for China’s economic growth next year to 3.8%, based in part on expectations of a drop in global demand for Chinese goods.

Corporate US and European Economic Group recession forecast next year, Barclays’ Hong Kong-based Jian Chang and Yingke Zhou said in a report Wednesday.

As a result, it now expects China’s exports to fall between 2% and 5% in 2023, compared with its previous expectation of 1% growth, the report said.

“China’s share of global exports has fallen this year,” the analysts said. “Foreign companies are considered to have move their orders out of China to neighboring Asian countries, including Vietnam, Malaysia, Bangladesh and India, to produce some key labor-intensive goods. “

Exports remain an important driver of the Chinese economy, especially as the pandemic disrupts global supply chains and creates high demand for medical and electronic products.

According to the customs authority, China’s exports grew 29.8 percent last year in U.S. dollars, after rising 3.6 percent in 2020.

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However, growth has slowed this year. As of September, annual export growth was 12.5%.

Customs data shows that the last time China’s exports fell was in 2016.

Real estate pull

Barclays’ new 2023 China GDP forecast of 3.8% comes after it was cut to 4.5% in September due to a drop in property investment.

Analysts’ latest GDP cut includes expectations for a steeper decline in real estate investment, between 8% and 10%, compared with previous projections of a low single-digit decline.

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China’s real estate sector and related industries contribute about a quarter of GDP. The property market has slumped in the past two years as Beijing cracks down on developers’ reliance on debt for growth, while Consumer demand for homes has fallen sharply.

Tight Covid control measures have curbed overall consumer sentiment, and hopes that China will ease restrictions soon helped fuel a rally in equities this week. Beijing has yet to make any official announcements about changes to its “dynamic zero-Covid policy”.

High household debt

Other banks cut forecasts for 2023

In recent months, other analysts have cut their forecasts for China’s GDP next year.

Nomura cut its forecast from 5.1% to 4.3%. China’s chief economist Ting Lu noted the impact of Covid, weaker exports, a slow recovery in assets and a softer auto market after passenger car sales soared this year.

In September, Goldman Sachs cut its 2023 GDP growth forecast to 4.5%, from 5.3%, “considering the delayed recovery from China’s reopening.”

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