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China’s Economic Outlook Weakened: S&P Global cuts 2023 growth forecast to 5.2% from 5.5%

The main factors to China's slowing growth lies in the loss of momentum in its recovery due to weakened consumer confidence and a sluggish housing market.

Beijing, China, June 26:  S&P Global, a leading credit ratings agency, cuts its economic growth forecast for China this year, highlighting the uneven nature of the country’s post-reopening recovery and indicating a slowing Chinese economy.

According to S&P, China’s GDP growth for 2023 is now expected to reach 5.2%, down from the previous estimate of 5.5%.

This marks the first downward revision by a global credit ratings agency this year, following similar adjustments made by major investment banks, including Goldman Sachs.

S&P emphasized that the main factors for China’s slowing growth lie in the loss of momentum in its recovery due to weakened consumer confidence and a sluggish housing market.

After emerging from three years of strict zero-COVID policies, the world’s second-largest economy has experienced a slowdown.

In May, property investment declined further, industrial output and retail sales growth fell short of expectations, and youth unemployment reached a record high of 20.8%.

Various forecasts for China’s GDP growth this year range between 4.4% and 6.2%.

To address the economic challenges, S&P suggested potential measures such as easing housing purchase restrictions and mortgage down-payment requirements, expanding credit and infrastructure financing, and potentially providing fiscal support for consumption.

Prominent figures, including Ning Jizhe, a senior economic official and former head of China’s statistics bureau, have called for the implementation of supportive measures.

Jizhe emphasized the importance of acting sooner rather than later, indicating that the impact of these measures should not be underestimated.

In recent weeks, China has already taken steps to stimulate the economy.

The country’s key lending benchmarks were reduced for the first time in 10 months, and the People’s Bank of China (PBOC) lowered short- and medium-term policy rates.

Sources involved in policy discussions have indicated that additional stimulus is expected to be introduced throughout the year.

State media outlets, including major state-run securities newspapers and the state-controlled Global Times, have been raising awareness about the need for further measures.

Furthermore, there are concerns over the economy’s performance as reflected in recent market trends.

China and Hong Kong stocks experienced a slump following disappointing domestic tourism figures during the recent three-day Dragon Boat Festival.

Additionally, the yuan weakened against the dollar, further indicating market pessimism.

Market participants widely anticipate that the Chinese Communist Party’s political bureau meeting in July will unveil stimulus policies.

Nie Wen, an economist at investment firm Hwabao Trust, noted that state media is actively promoting expectations for increased stimulus ahead of the meeting, thereby shaping public opinion.

However, these cuts in forecasting further downgrade the global business confidence in the Chinese economy.

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