Goldman Sachs says China’s GDP growth slips to 4%, fueling easing bets

China's economic growth has fallen further below Beijing's annual target at the start of the third quarter, with Goldman Sachs ↗ 2.18% estimating GDP expansion slowed to about 4%, intensifying expectations that policymakers will soon deliver fresh monetary stimulus.

Growth Deteriorates as Demand Weakens

Hui Shan, Goldman's chief China economist, said in a report published on August 23 that growth early in the third quarter was running at approximately 4% year-over-year, down from 4.3% in the second quarter and well below Beijing's full-year target of 4.5% to 5%. Hui described the weakness as "demand-driven," noting that "July's growth deceleration is more concerning than April's because it came from a lower starting point and impacted areas that had previously looked resilient."bloomberg+1

The assessment followed official July data that showed broad-based softening. Industrial output grew 4.5%, down from 5.3% in June, while retail sales rose just 0.6%. Fixed-asset investment fell 6.7% through July, and property investment dropped 19.2% as the real estate downturn deepened further. Youth unemployment among 16-to-24-year-olds climbed to 17.9%, an 11-month high.blockonomi

Other Banks Echo Bearish View

Goldman's estimate is among the most downbeat, but other global banks have flagged similar concerns. Macquarie Group said July data suggested monthly GDP growth was tracking at about 4.2%, while BNP Paribas put the expansion at 4.1%. BNP economists led by Jacqueline Rong warned that "if GDP growth continues to hover at or even below 4 per cent in August and September even with greater fiscal efforts, it will put the fulfilment of the annual growth target at risk," adding that policymakers would likely "introduce fresh stimulus in late September or early October."businesstimes

A reduction in the reserve requirement ratio is considered the most likely near-term step, with analysts projecting such a move in the fourth quarter to inject liquidity. The People's Bank of China has not cut its benchmark rate or RRR in over a year.businesstimes

Beijing Signals Incremental Response

Premier Li Qiang called on August 17 for the government to "strive to achieve" annual targets, and officials have since said they are considering loan subsidies and additional financing support for businesses and consumers. However, top officials have proposed only incremental steps and signaled little urgency for bolder measures.businesstimes

Goldman's Hui cautioned that Beijing's focus on technological innovation and high-tech manufacturing is unlikely to create durable demand momentum. "Upcoming measures may help the government meet this year's growth target, but they remain mostly supply-driven and are unlikely to create durable momentum," she said.businesstimes