Goldman Sachs recently released four economic analysis reports, one of which is about the forecast analysis of China's economy in 2024.
This company is a globally renowned investment bank and financial services provider, and their reports are often closely followed by the market and investors.
Although people trust their economic reports, we all understand that economic forecasts are always uncertain.
- Forecast of China's Overall Economic Situation in 2024
Goldman Sachs' view on China's overall economy in 2024 is as follows:
China's economy briefly recovered in early 2023, but the growth rate later slowed down. Although the lockdown has been lifted, the actual GDP growth rate in 2023 may be around 5.3% due to the impact of real estate issues, declining consumer confidence, and local government debt problems.
If more hedging policies are not introduced, the economy may further decline next year. This weak growth will further weaken long-term economic growth expectations. Goldman Sachs believes that China has entered a policy adjustment cycle, and they expect policies to become more accommodative in the coming months.
They predict that China's actual GDP growth rate in 2024 will be around 4.8%.
In addition, they also predict that loose policies will enhance the economic growth momentum in the first half of 2024. However, even with the support of central government policies, inflation may still be relatively moderate, with core inflation increasing from 0.3% in 2023 to 1.3%, but still below the government's target of 3%.
Goldman Sachs also points out that although their growth forecast for 2024 is higher than other institutions, they still hold a cautious attitude towards China's long-term economic growth. In the next few years, China's economy will face changes in population structure, real estate issues, deleveraging of local government debt, and global supply chain risks.
- Forecast of China's Household Consumption in 2024
In terms of household consumption in China in 2024:
Goldman Sachs believes that consumption will become the main driving force for China's economic growth in 2023. They predict that real household consumption will grow by 8.5% year-on-year, especially with suppressed transportation and entertainment expenses due to the pandemic, which may exceed the overall growth of household consumption.
In the third quarter of 2023, the household savings rate briefly increased due to the pandemic's impact on summer travel demand.
They believe that this trend may continue in 2024, but the increase in unemployment benefits may affect household income growth. At the same time, the household savings rate also remains relatively stable under the influence of urbanization and real estate, and households with houses will increase precautionary savings.
- Forecast of China's Real Estate in 2024
Regarding real estate, Goldman Sachs believes that since mid-2021, the real estate market has entered a long-term downward cycle, with many indicators showing a sharp contraction.
From the peak of 2020-2021, new home sales have declined by 40%, new home construction has declined by 65%, and real estate investment has declined by 20%. The price of second-hand houses has dropped by more than 10%.
Although policies have started to relax, real estate developers still face enormous financing pressure. In August, Evergrande defaulted on interest payments. Policies have started to extend to major cities, but the impact is not significant. Stimulus policies such as reducing down payment ratios, interest rate cuts, urban village renovations, public housing policies, and fund arrangements may be introduced.
Goldman Sachs believes that it is unlikely that a property tax will be implemented nationwide before 2025. Urban village renovations may expand in scale, but unlike the slum renovations from 2015 to 2018, they will have a smaller impact on a limited number of buildings.
Due to factors such as market oversupply, unfavorable financing environment, and control of the second-hand housing market, the real estate sector will continue to drag down China's economy in the next few years. Considering the relaxation of policies, 2024 may show slight improvement compared to 2023.
However, long-term completion risks should be monitored. Although new home completions will grow by double digits in 2023 and 2024, the sudden contraction in new home construction from 2022 to 2023 will affect the growth of real estate completions after 2025.
In summary, Goldman Sachs believes that China's real estate market has been experiencing a long-term downward cycle since mid-2021, with all indicators showing a sharp decline. Although policies have been relaxed to some extent, real estate developers still face significant financing pressure. They believe that the real estate sector will continue to drag down China's economy in the next few years, although there may be slight improvement in 2024 due to policy relaxation.
- Forecast of China's Inflation Level in 2024
In the first half of 2023, CPI experienced a significant decline, mainly due to the decrease in prices of agricultural products and durable goods, while core CPI remained near zero.
Goldman Sachs predicts that core CPI will increase from 0.3% in 2023 to 1.3% in 2024, with pork prices being the main driver of the increase. PPI is also expected to narrow from -5.4% to -2.6%, and Goldman Sachs estimates that PPI will rise from -2.9% to 0.6% in 2024.
The situation will become more difficult in the future. The district committee has instructed us to fight separately and persist. We must persevere because perseverance is victory.