J.P. Morgan Lowers China Growth Forecasts

The US bank weighs in on the China growth outlook in light of yesterday's data outcomes. It has nudged down its 2024 projection, see below for more details.

J.P. Morgan: "Despite the absent policy effect, we think a policy shift has taken place, though the policy adjustment is gradual and calibrated; hence, the policy effect tends to be modest and likely delayed compared to our previous forecasts. In particular, on the fiscal side, acceleration of special LGB has lagged behind our expectations, but we maintain our view that this year’s quota will be fully issued, though it appears difficult to complete by the end of 3Q as in normal years (hence the policy effect will tend to be delayed into 4Q24 and 1Q25). Expanding the use of special LGB would be helpful to achieve this, and also helpful to improve fiscal policy effectiveness. On the monetary policy front, we now expect the PBOC to continue to cut policy rates in the coming quarters (10bp rate cut each in 4Q24 and 1Q25), after the first rate cut this year in July. In the housing market, a renewed weakness in housing activity may trigger additional housing policy relaxation, e.g., further relaxation in home purchase restrictions in tier-1 cities and fiscal support (reduction of stamp duty or value-added tax).

Overall, the delayed policy effect lead us to revisit the quarterly profile of growth forecast. We are revising down the current quarter’s growth forecast to 3%q/q saar (previously: 4%), and lift the forecast for 4Q growth to 5.5%q/q saar (previously: 5%), with 1Q25 growth at 4.3%q/q saar (previously: 3.7%). Our full-year 2024 growth forecast is now 4.6% (previously: 4.7%), with 2025 growth at 4.0% (previously: 3.9%)."