Goldman Sachs cuts China 2026 GDP forecast to 4.5%

Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36% has cut its 2026 full-year GDP growth forecast for China from 4.6 percent to 4.5 percent, citing weaker-than-expected economic activity and a widening gap between resilient factory output and faltering domestic demand. The bank also lowered its 2027 projection from 4.7 percent to 4.6 percent.thestandard

The downgrade, disclosed on Monday, came on the heels of August economic data released Tuesday by China's National Bureau of Statistics that painted a familiar picture of imbalance in the world's second-largest economy.manilatimes+1

A Two-Speed Economy

Industrial output grew 5.2 percent year-on-year in August, accelerating from 4.5 percent in July and beating the consensus forecast of 4.8 percent. Output of lithium-ion batteries and industrial robots surged 57.2 percent and 34.6 percent respectively, reflecting the global AI infrastructure boom.cnbc+1

But consumer spending continued to weaken. Retail sales rose just 0.4 percent, slowing from 0.6 percent in July and missing estimates of 0.8 percent. Fixed-asset investment contracted 7.2 percent in the January-to-August period, the steepest drop since April 2020, with property investment plunging 19.9 percent over the same stretch.manilatimes+3

Growth Target Under Pressure

Second-quarter GDP growth slowed to 4.3 percent, the weakest pace in more than three years and below the lower end of Beijing's 4.5-to-5.0-percent annual target. Goldman Sachs now expects third- and fourth-quarter growth of 4.4 percent each.manilatimes+1

Goldman Sachs is not alone in trimming its outlook. Oxford Economics lowered its 2026 forecast by 0.1 percentage point to 4.7 percent, "reflecting a more prolonged property downturn which is likely to keep growth subdued despite stronger public investment," senior economist Sheana Yue said.manilatimes

"Barring an unexpectedly strong September, GDP growth will likely remain sluggish in the third quarter," said Lynn Song, ING's Greater China chief economist.manilatimes

Stimulus Expectations Build

Goldman Sachs noted that the intensified Middle East conflict, ongoing property weakness, and delayed policy easing are expected to weigh on near-term growth. The urban surveyed unemployment rate edged up to 5.3 percent in August from 5.2 percent in July.thestandard+1

Recent government signals have raised expectations that additional stimulus measures will follow if growth slows further, Goldman Sachs said. Tuesday's data barely moved Chinese markets, with key benchmarks falling roughly 0.3 percent and the yuan weakening slightly against the dollar.manilatimes+1