China’s economy is turning around even as ‘3D challenges remain’

Goldman Sachs Group Inc. upgraded its forecasts for China’s economic growth in 2024 and 2025 after Beijing unveiled a series of measures to bolster growth, including plans for higher public spending announced over the weekend.

The bank expects China’s gross domestic product to grow 4.9% this year, up from 4.7% previously. It also raised its growth forecast for next year to 4.7 percent from 4.3 percent, according to a report dated Sunday.

“China’s latest round of stimulus clearly signals that policymakers have made a U-turn on cyclical policy management and increased their focus on the economy,” Goldman economists including Hui Shan wrote.

The update comes as economists and investors assess the potential effects of Beijing’s push since late September to boost an economy facing weak sentiment and persistent deflationary pressures. The finance ministry promised more fiscal support at a much-anticipated briefing on Saturday, though it fell short of measures to boost consumption that some analysts say are needed to beat deflation.

Finance officials said 2.3 trillion yuan ($325 billion) of local government special bond funds will be used in the fourth quarter, suggesting a more “backward” government spending schedule and a pick-up in higher growth than the bank previously anticipated, according to the Goldman report. .

In addition, the country’s top economic planning agency, the National Development and Reform Commission, said last week it would pre-approve 200 billion yuan worth of investment projects for next year by the end of this year. month This is an effort to meet the GDP growth target of “around 5%” for this year, the bank said.

The announced and hinted easing measures will translate into a 0.4 percentage point increase in economic growth next year, helping to offset the expected 1.9 percentage point drag from the slowdown in exports and the continuous real estate decline.

However, Goldman warned that China’s structural challenges remain and maintained its outlook for 2026 and beyond.

“The ‘3D’ challenges — deteriorating demographics, a multi-year debt deleveraging trend and global supply chain momentum — are unlikely to be reversed with the latest round of policy easing,” wrote the economists