Goldman Sachs raises China growth outlook on optimism over Beijing’s fresh push to revive struggling economy

Skyscrapers in Beijing.

China may not fall too short of its growth targets this year after all, Goldman Sachs analysts said.

The analysts upgraded their 2024 forecast for China’s GDP from 4.7% to 4.9% after officials in Beijing pledged a new round of stimulus measures. That’s just shy of Beijing’s goal of 5% economic growth.

“The latest round of China stimulus clearly indicates that policymakers have made a turn on cyclical policy management and increased their focus on the economy,” the analysts said in a Sunday note.

They said their upgrade was largely based on promises of greater public spending from the Ministry of Finance at a highly-anticipated press conference on Saturday.

Officials said that 2.3 trillion yuan ($15.4 billion) of local government special bond funds will be used in the fourth quarter of this year, suggesting a higher government debt ceiling, or “the largest in recent years.”

The analysts said that the announcement indicates “a more back-loaded fiscal impulse and a larger rebound in growth from Q3 to Q4 than we previously anticipated.”

The analysts from Goldman also pointed to fuel for near-term construction starts.

Last week, China’s top economic planning agency, the National Development and Reform Commission, said it would pre-approve 200 billion Chinese yuan ($28.2 billion) of next year’s projects by the end of October, presumably to begin construction before the end of the year.

They said that effort could help the country’s GDP growth get closer to the “around 5%” target for 2024, which looked increasingly unlikely for most of this year.

The analysts also upgraded their growth forecast for next year, from 4.3% to 4.7%. They say that while China’s struggling property market will continue to weigh on the economy and as export volume slows from its massive growth this year, the step-up in the latest stimulus is still more policy easing than they had originally accounted for.

The analysts add that while they upgraded forecasts for the near term, they still see major structural headwinds in the long-term.

“While we have upgraded our cyclical view on the back of the more forceful and coordinated China stimulus, our structural view on China’s growth has not changed,” the analysts said.

“The ‘3D’ challenges – deteriorating demographics, a multi-year debt deleveraging trend, and the global supply chain de-risking push are unlikely to be reversed by the latest round of policy easing,” they added.

China’s recent stimulus pushes have aimed to prop up its weak economy, which has been plagued by a struggling property sector and weak domestic demand.