World Bank and Barclays raise GDP forecast for country

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Employees work on the production line of a textile company in Ganzhou, Jiangxi province (ZHU HAIPENG / FOR CHINA DAILY)

Foreign institutions have raised their forecasts for China’s economic growth this year amid its better-than-expected first-quarter performance, strong policy stimulus and resilience in exports.

Barclays recently revised its China GDP forecast from 4.4 per cent to 5 per cent, and the World Bank changed its forecast from 4.5 per cent to 4.8 per cent.

China is on track for a steady economic rebound and is poised to meet its preset annual growth target of about 5 per cent, experts said.

As the broader economy continues to face pressures from lacklustre demand and mounting external uncertainties, they called for stepped-up fiscal support to boost domestic demand. Deepening reform further is imperative in dealing with some structural issues, they said.

Zhang Xiaoyan, associate dean of the PBC School of Finance at Tsinghua University in Beijing, said the country’s annual GDP target of about 5 per cent is highly achievable.

The country still has huge growth potential and favourable conditions, given its huge domestic market, a complete industrial system and abundant talent, Zhang said.

“We’re slowly coming out of the negative shock (of the pandemic), and the economy is slowly recovering.”

Technological innovations, such as artificial intelligence, and green industries will serve as new growth drivers, Zhang said.

Yao Yang, director of the China Centre for Economic Research at Peking University, said the annual growth target of about 5 per cent is feasible.

“The Chinese government needs to take a bigger step to boost demand,” he said, suggesting an increase in government spending.

China has already announced measures to boost demand, including issuing 1 trillion yuan (£108 billion) worth of ultra-long-term special treasury bonds this year as well as driving large-scale equipment renewal and trade-in deals for consumer goods.

In late June the National Development and Reform Commission and four central departments jointly published a document setting out measures to promote new consumption in areas such as tourism, motor vehicles and electronics.

Daniel Zipser, senior partner with the management consultancy McKinsey & Co, said China’s consumption market “has seen a moderate recovery so far, and we anticipate this trend to continue”.

Zipser, who is also head of McKinsey’s consumer and retail practice in Asia, said China’s growth over the past 20 years has come from the rise of the middle-income group, and “there is still substantial potential ... for more urbanisation, more income increases”. He expressed confidence regarding the country’s long-term prospects, saying the rise of the middle-income group will continue to drive consumption.

Experts said China is on the right track in dealing with its real estate troubles, with policy easing measures recently announced for the industry. They expect to see more forceful efforts to digest housing inventories and further deepening of reform to tackle issues hindering the economy’s healthy growth, they said.

Robin Xing, chief China economist at Morgan Stanley, said China’s policies are moving in the right direction.

“Nominal growth is likely to remain steady in 2024 and improve modestly in 2025.”

A housing buyback initiative, if implemented smoothly, could improve developers’ liquidity for housing completion and also effectively increase public housing provision, Xing said.

Zhou Lanxu contributed to this story.