Goldman cuts China 2022 growth forecast to 4%

HONG KONG (May 18): Analysts at Goldman Sachs said on Wednesday they were lowering their China 2022 gross domestic product growth forecast to 4% from 4.5% as a result of Covid-19-related damage to the economy in the second quarter of this year.

It was more likely China’s economy would undershoot than overshoot their target, they added.

“Even this lower growth projection embeds the assumption that Covid is mostly under control going forward, the property market improves from here, and the government provides substantial policy offset through infrastructure spending in coming months,” they wrote.

China’s retail and factory activity fell sharply in April as widespread Covid-19 lockdowns confined workers and consumers to their homes and severely disrupted supply chains.

China’s uncompromising strategy to fight Covid-19 has placed hundreds of millions of people in dozens of cities under restrictions of some kind, and has disrupted a global rebound in production of everything from mobile phones to electric vehicles.

While the United States, Europe, and other major economies have chosen to “live with the virus” as they reopen and rely on vaccines to fight the pandemic, in China such policies are seen as encouraging inaction against a deadly and highly infectious virus and as such are politically unpalatable.

The commercial hub of Shanghai on Wednesday achieved a fourth consecutive day without any new infections outside the most locked down areas but authorities are not lifting the lockdown immediately, instead gradually easing restrictions until June 1.

Economists said China’s official 2022 growth target of around 5.5% is looking harder and harder to achieve.