VIEW: Goldman Sachs Talks To Clients Re China Outlook

Goldman Sachs spoke with some of its onshore clients in China about the outlook for the economy. Overall the outlook “had not changed much” but they were more nervous about the export outlook and “more pessimistic about potential policy easing” because of problems designing and implementing it.

• There were “low expectations for structural reforms and concerns over policy implementation”.
• Goldman’s offshore clients “questioned the sustainability of supply-side expansion, especially given weak domestic demand and growing protectionism in the west. Although recent tariff hikes by the US and EU would have limited macro impacts, they were concerned about the rising risks of trade frictions.”
• “Local clients remained bearish on the domestic consumption growth outlook. They expected declining property prices, slowing wage growth and the issue of youth unemployment to continue to weigh on consumer confidence.”
• Goldman Sachs notes that there is “broad consistency” and only “small differences” between onshore and offshore clients on the macro outlook for China.
• “Offshore clients also had low expectations for the upcoming Third Plenum on the reform front, while they broadly believed more policy easing signals are necessary for the July Politburo meeting. They showed more interest in the differences between Biden’s and Trump’s potential strategies with respect to China, China’s potential responses (e.g., tariff retaliation, domestic demand-side stimulus, FX policy and geopolitical maneuvers), and the impact on growth, inflation and RMB.”