China economists expect 5.4% GDP growth in 2023: survey
Outlook upgraded on consumption recovery, exceeding Beijing's 5% target
HONG KONG -- The Chinese economy this year is expected to grow faster than previously forecast and exceed the government's target of "around 5%," according to a survey of local economists.
A survey of 28 economists in March revealed that, on average, they expect the Chinese economy to grow 5.4% in 2023, up from 4.7% they forecast in December. The survey was jointly conducted by Nikkei and Nikkei Quick News.
While many of the economists expect the Chinese economy to expand at a faster pace than the government target of "around 5%," led by a consumption recovery, there are growing concerns that the world's second-largest economy will run out of steam, partly due to a banking crisis in the West.
Barclays Chief China Economist Jian Chang is upbeat on the Chinese economy, forecasting growth of 5.6% in 2023. "We think the improving January-February activity data -- led by a rise in retail sales, a smaller contraction in property investment [and] home sales, and the strong rebound in services activity -- broadly confirm the rebound in domestic demand triggered by the faster-than-expected reopening," Chang pointed out.
T. Rowe Price Chief of China and Emerging Markets Macro Strategy Chris Kushlis took a similar view, saying: "The recovery should be relatively front-loaded as services sector activity in particular comes back initially while manufacturing remains steady." Kushlis stressed that the government's growth target of around 5% is "relatively modest given the potential for activity to rebound."
But there are also strong concerns that China's economic recovery will peter out. Mizuho Bank Senior Economist Hideki Ito sees the pace of recovery in consumption slowing down because of a worsened employment and income environment due to lingering effects of the COVID-19 pandemic. "The slowdown in the global economy is likely to put downward pressure on external demand," he said.
When asked a multiple-choice question about this year's economic risk factors, eight economists chose weak consumer sentiment as the biggest risk. Delayed recovery in the labor market was another key factor.
Haibin Zhu of J.P. Morgan pointed out that the unemployment rate for the group aged 16-24 rose again to 18.1% from 16.7% in December. "Although the unemployment rate tends to be a lagging indicator in the process of economic recovery, it raises concerns about the income outlook and the sustainability of economic recovery," Zhu said.
Many economists also cited sluggish export demand on the back of the recent bank fallouts in the West and the U.S.-China confrontation.
Tetsuji Sano of Sumitomo Mitsui DS Asset Management expressed concern over weakness in the manufacturing sector in the U.S, a key export destination. He said bank fallouts are "likely to trigger financial instability, and if the risk of a downturn in the U.S. economy materializes, Chinese exports will be further depressed."
The U.S. has taken measures to restrict some exports to China and clarified its stance of shutting China out of the global semiconductor and other supply chains.
Kenny Ng of Everbright Securities said, "The Taiwan Strait situation, supply chain and other key factors will affect the foreign investment sentiment in China, which is also one of the more critical factors for the mainland economy in the recovery stage."
The latest survey also asked economists about the policy priority for new premier Li Qiang, who took office in March. The most common answer was restoring the confidence of companies.
Francoise Huang of Allianz Trade pointed out that the past few years have been "riddled with events that hit corporate confidence," such as China's zero-COVID policy, regulatory changes and geopolitical tensions.
"Measures and reforms in favor of corporate confidence would help sustain the post-COVID recovery of the Chinese economy, nourish China's innovation potential and aim to keep China attractive for foreign investors and businesses despite geopolitical tensions," Huang emphasized.
Li, who helped lure Tesla to set up a plant in Shanghai when he was the city's Communist Party chief, is generally viewed as understanding how the business sector works. However, he imposed a severe two-month lockdown on Shanghai last year as part of the nation's zero-COVID strategy. As such, economists say they are watching Li closely to see if he can ease doubts surrounding potential policy risks in China.
The latest survey also shows that economists expect China's gross domestic product to slow gradually after bouncing back in 2023, with the average estimates for 2024 and 2025 growth at 4.9% and 4.6%, respectively.
Bert Burger of Atradius called for structural problems to be addressed, saying, "Weak export growth, because of China losing competitiveness and the U.S.-China trade war, would add to the domestic growth challenges. Aging is the most important of these domestic challenges, while the impact of it will be felt not only in 2023, but for much longer."
The economists who responded to the survey
- Arjen van Dijkhuizen, Senior Economist, ABN AMRO Bank; Francoise Huang, senior economist for Asia-Pacific, Allianz Trade; Raymond Yeung, Chief Economist for Greater China, ANZ Bank; Bert Burger, Principal Economist, Atradius; Jian Chang, Chief China Economist, Barclays Asia Pacific; Ricky Choi, Chief Economist, Bank of East Asia; Francis Cheng, Economist, Bank of East Asia; Chen Xingdong, Chief China Economist, BNP Paribas; Helen Qiao, Head of Asia Economics, BofA Global Research; Samuel Tse, Economist and Strategist, DBS; Kenny Ng, Securities Strategist, Everbright Securities International; Andrew Fennell, senior director and head of Greater China sovereigns, Fitch Ratings; Hui Shan, chief China economist, Goldman Sachs; Thomas Shik, Chief Economist, Hang Seng Bank; Cheng Shi, Chief Economist, ICBC International; Shen Jianguang, chief economist, JD.com; Haibin Zhu, chief China economist, J.P. Morgan; Erik Lueth, Global Emerging Market Economist, Legal & General Investment Management; Homin Lee, Senior Macro Strategist, Lombard Odier; Hideki Ito, Senior Economist, Mizuho Bank (China); Fan Xiaochen, Director of Economic Research Office (Hong Kong), MUFG Bank; Ting Lu, chief China economist, Nomura; Tommy Xie, Head of Greater China Research & Strategy, OCBC Bank; Dong Chen, Head of Asia Macroeconomic Research, Pictet Wealth Management; Louis Kuijs, Asia-Pacific chief economist, S&P Global Ratings; Shuang Ding, Chief Economist, Greater China and North Asia, Standard Chartered Bank (HK) Limited; Tetsuji Sano, chief Asia economist, Asia Research Center, Sumitomo Mitsui DS Asset Management (Hong Kong); Chris Kushlis, chief of China and emerging markets macro strategy, T. Rowe Price; Wang Tao, Head of China Economic Research, UBS