Goldman Sachs has raised its China growth forecast, reflecting optimism stemming from recent government stimulus measures and new statements indicating a willingness to adopt a more aggressive approach to revitalize the economy. The investment bank upgraded its full-year GDP prediction to 4.9%, up from 4.7%, and its 2025 growth estimate to 4.7% from 4.3%. Beijing has set an annual growth target of "around 5%."
Chief China economist Hui Shan emphasized that the latest stimulus signals a significant shift in policy management towards prioritizing economic recovery. During a recent briefing, China's finance ministry hinted at a forthcoming large stimulus package aimed at bolstering the struggling property sector and suggested an increase in government borrowing. Although specifics were not disclosed, Finance Minister Lan Fo’an described the upcoming debt resolution plan as potentially the "largest in recent years."
These comments have sparked investor optimism, leading to a surge in Chinese stocks. The Shanghai Composite index rose over 2% on Monday, while the benchmark CSI 300 finished just under 2% higher, recovering from previous lows. Over the past month, the CSI 300 has increased by 25%, driven by the most aggressive monetary stimulus measures since the pandemic began.
This stimulus package, unveiled on September 24, includes interest rate cuts, reduced reserve requirements for banks, enhanced liquidity for the stock market, and mortgage relief, among other initiatives. However, some economists caution that the initial excitement surrounding Chinese stocks may wane as they await a significant additional package estimated at around 2 trillion yuan (approximately $284 billion).
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