JPMorgan cuts China’s GDP expectation

JPMorgan on Friday cut its forecast for fourth-quarter growth in China to 4.0% in its annual comparison from a previous expectation of 5.0 percent.

The institution cited the impact of power shortages and the reappearance of Covid-19 outbreaks affecting consumer spending and services.

“Looking back, we have lowered China’s growth forecasts five times since August,” said Haibin Zhu, chief economist at JPMorgan, in an analysis note.

The specialist added that the bank now expects growth for all of 2021 of 7.8%, from 8.3% in October, and 4.7% for 2022.

“In particular, we note that the average annual growth rate of GDP (compared to two years ago) has slowed markedly,” he said.

Confinements return

JPMorgan is not the first financial firm to adjust its estimates for the Asian country.

In the third quarter of 2021, China grew 4.9% annually. The figure was well below 7.9% in the second quarter of this year and 18.3% in the first quarter.

Thereafter, Bank of America, for example, lowered its forecast for this year to 7.7 from 8.0 percent, and cut its forecast for 2022 to 4 percent from 5.3 percent.

Citi, for its part, kept its estimate for this year in a range between 5 and 6% and lowered its forecast for 2022 to 4.9% from 5.5 percent.

Growth prospects have recently been deteriorated by Covid-19 outbreaks. The government has responded with strict geographic control measures. International media estimate that there are already at least 6 million people confined in 14 provinces.

As hosts of the Beijing Winter Olympics in February 2022, which represents a golden opportunity for the revival of tourism and consumption, the government wants to prevent an expansion of the epidemic.


China had a very bumpy October, marked by power outages and the debt crisis of the country’s second-largest real estate developer, Evergrande.

The energy crisis began with a rapid increase in exports, driven by the global recovery that fueled a rapid increase in electricity demand from factories.

As a result, when demand for electricity increased, energy providers cut supplies, thus forcing some manufacturers to reduce their production either by changing hours of operation or simply by cutting the number of hours.

Some international analysts and observers even warned that Chinese factories would not be able to fill their global orders on time due to these disruptions.

But the government immediately took action. He ordered a rapid expansion of some coal mines and the reopening of others. It gave utility companies more flexibility in setting electricity prices and pressured manufacturers to boost energy efficiency and accelerate investment in renewable energy.

And to the world’s surprise, China’s trade data was more positive than expected in October, according to official data released Sunday.

According to the statistics of the customs authorities, exports in October grew 27.1% in its annual comparison to 300,200 million dollars.

Evergrande, an unknown

Another concern continues to be the real estate sector, which is a mainstay of the Chinese economy. The potential collapse of Evergrande, one of the largest real estate developers in that country, could seriously affect you.

Despite having a debt of 300,000 million dollars, analysts have already ruled out that its collapse could cause a risk to the global financial system, but it could wreak havoc within China because it is an important link in the country’s production chain .

Some non-bank financial institutions would also be in trouble, but the hardest hit would be their supply chain. That is, a chain effect. All of this would worsen China’s economic prospects.

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