Goldman: Working To Smooth Economy’s Bumpy Deceleration, Mark Higher In ’24 GDP Call

Goldman Sachs write “Beijing will need to ease further if it wants to limit deceleration in 2024 amid challenging external conditions and the ongoing property sector drag.”

• “There is room to do so, given low inflation, stringent capital controls, and a relatively healthy central government balance sheet.”
• “The late-in-year issuance of a central government bond and increase in the official fiscal deficit are unusual and suggest growth concerns have become serious enough to strike Beijing's "policy put". We are therefore lifting our expectations for policy support next year (augmented fiscal deficit of 11% of GDP in 2024, from 9.8% previously, as well as additional cuts to reserve requirements and to the policy rate) and growth (we now forecast 4.8% real GDP growth in 2024, from 4.5% previously).”
• “China's official 2024 policy targets will be set at December’s Central Economic Work Conference. Managing the property sector downturn and associated fallout (local government/LGFV debt, household and business confidence) is likely to remain a preoccupation of economic policy.”
• “We expect policymakers to maintain fairly strict capital controls and continue to push back on RMB depreciation.”