高盛-中国问题：下调 GDP 预测以应对持续的增长逆风和有限的政策反应

18June2023|8:19PMHKT

ChinaMatters

LoweringGDPforecastsonpersistentgrowthheadwindsandconstrainedpolicyresponses

nAfterastrongstartinQ1,China’spost-reopeningrecoveryappearstohavefizzledoutinQ2.Althoughcontact-intensiveservicessectorscontinuedtoheal,Mayactivitydatashowthatthepropertymarket,thelargestsectorintheeconomy,weakenedagain.Propertyinvestmentgrowthdeclinedto-10%yoyandproperty-relatedproductsunderperformedindetailedindustrialproductionandretailsalesdata.Withno“easyfix”onthehorizon,thepropertymarket’sweaknessanditsnegativeimpactontherestoftheeconomyislikelytopersist.

nThecombinationofdeterioratingactivityinthepropertymarketandasharpdeclineinexportshavetriggeredpolicyreactions.OnJune13th,thePBOCcutOMOrateby10bp.OnJune16th,PremierLiQiangheldaStateCouncilmeetingcallingforabasketofeasingmeasurestoberolledoutsoon.Weexpectmorepolicyeasingfortheremainderof2023,includinganotherRRRcutinQ3andanother10bpOMOratecutinQ4onthemonetaryfront.

nHowever,webelievepolicymakersfaceconstraintsandtheupcomingpolicyeasingwillnotbeaslargeandforcefulasduringthe2008-09,2015-16and2020cycles.Giventhechallengingdemographictrajectory,thealreadyelevateddebtlevels,andthe“housingisforlivingin,notforspeculation”mantra,wethinkanypropertyandinfrastructurestimulusislikelytobeonlytargetedandmoderate,tobeconsistentwiththetopleadership’s“high-qualitygrowth”model.

nIncontrasttopropertyandinfrastructure,policysupporttohigh-endmanufacturing,newenergyvehicles,andotherconsumptioncategoriesisconsistentwithChina’s“high-qualitygrowth”model.However,becausesuchpolicysupporthasalreadybeenongoing,thecontinuationofthesepoliciesisunlikelytogenerateastronggrowthimpulse.

nOnnet,wethinkthepersistentgrowthheadwinds(propertyslowdownandconfidencedeficitinparticular)arelikelytowintheupperhandinthetugofwarbetweenweakeninggrowthmomentumandincreasedpolicyeasing.Assuch,werevisedownourQ2GDPgrowthforecastto1.0%qoqann(vs.4.9%previously).Weexpectgrowthtoaccelerateto6.5%qoqanninQ3(vs.5.3%previously)onmorepolicysupportandfadingdragfromtheinventorycycle.Thesechangesreduceour2023full-yearrealGDPgrowthforecastfrom6.0%to5.4%andour2024full-yearrealGDPgrowthforecastfrom4.6%to4.5%.

HuiShan

+852-2978-6634|

hui.shan@

GoldmanSachs(Asia)L.L.C.

MaggieWei

+852-2978-6962|

maggie.wei@

GoldmanSachs(Asia)L.L.C.

LishengWang

+852-3966-4004|

lisheng.wang@

GoldmanSachs(Asia)L.L.C.

XinquanChen

+852-2978-2418|

xinquan.chen@

GoldmanSachs(Asia)L.L.C.

YutingYang

+852-2978-7283|

yuting.y.yang@

GoldmanSachs(Asia)L.L.C.

AndrewTilton

+852-2978-1802|

andrew.tilton@

GoldmanSachs(Asia)L.L.C.

Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto

/research/hedge.html.

ChinaMatters

GoldmanSachs

Restaurantservices

AutosalesPropertycompletionsOnlinegoodssales

RetailsalesServicesoutputindex

InfrastructureFAI

ElectricityproductionManufacturingFAI

IPFAI

Cementproduction SteelproductionPropertynewsalesExports

PropertyFAIPropertynewstarts

LoweringGDPforecastsonpersistentgrowthheadwindsandconstrainedpolicyresponses

China’s

Mayactivitydata

showedthatindustrialproduction(IP)growthwasinlinewithlowmarketexpectations(3.5%yoy),butretailsalesandfixedassetinvestment(FAI)growthwereweakerthanconsensusandourforecasts.Acrossmajorindicators,consumptionandservicescontinuedtooutperform,consistentwith

ourview

thatthereremainednotableslackinthesesegmentsoftheeconomyevenafterthesharpreboundinQ1

(Exhibit1)

.However,theheadwindsfromrenewedweakeninginthepropertymarketweighedonadjacentindustriesandwassimplytoogreatfortheremainingreopeningimpulsesinconsumptionandservicessectorstofullyoffset.

Thesharpdeclineinexports(from+8.5%yoyinAprilto-7.5%yoyinMay)andthedeteriorationofpropertyindicatorsfinallytriggeredpolicyresponses.OnJune13th,thePBOC

cutpolicyrate

by10bpdespiteaweakeningRMB.OnJune16th,PremierLihelda

StateCouncilmeeting

andcalledforabasketofeasingmeasurestoberolledoutsoon.Atthisjuncture,theeconomyisunderatugofwarbetweenwaninggrowthmomentumandincreasingpolicysupport.Wejudgethatgrowthheadwindsarelikelypersistentwhilepolicymakersareconstrainedbyeconomicandpoliticalconsiderationsindeliveringmeaningfulstimulus.Asaresult,werevisedownour2023realGDPgrowthforecastfrom6.0%to5.4%,eventhoughwedialupourexpectationsforthisyear’spolicyeasing.

Exhibit1:Consumptionandservicesoutperformedwhilepropertyand

exportsunderperformedinMay

Double-digit

year-on-year

growth

Outright

year-on-year declines

-30-20-10010203040

Year-on-yeargrowthofactivityindicatorinMay(%)

Source:CEIC,GoldmanSachsGlobalInvestmentResearch

Thelongshadowofthepropertydownturn

AlleconomiesexperiencedCovidreopening.MostEMcountries,includingChina,didnotimplementthetypeofcash-handoutsthatmanyDMcountriesdid.Yet,noreopeningboostshavefadedasquicklyasinChina.TheMaydatasuggestChina’sseverepropertydownturnprobablywasakeyreasonbehindthisstarkdifference.Afterasharp,butbrief,

reboundinQ1

,thepropertymarket

slumped

againinQ2.Thecurrentlevelsofstartsandsalesareonly40%and54%ofthelevelsseenin2021H1rightbeforetheauthoritieslaunchedthepropertydeleveragingcampaign

(Exhibit2)

.Itishardtoimagine

2

18June2023

18June20233

50

40

30

20

10

0

-10

-20

-30

-40

50

40

30

20

10

0

-10

-20

-30

-40

EV

Powergeneratingequipment

Ethylene

Industrialrobot

Semiconductor

Non-ferrousmetal

Naturalgas

Chemicalfiber

Aluminium

Coal

Mobilephone

Crudeoil

Metalcuttingmachine

Causticsoda

Refinedoil

Auto

Coke

Sulphuricacid

Platedglass

Cloth SteelComputerCement

thatfundamentaldemandunderpinnedbydemographicsanddemolitionshaschangedsomuchsofast.

Exhibit2:ThereleaseofdelayedtransactionsboostedMarchpropertysalessignificantly

Millionunits,annualized

Millionunits,annualized

20

18

16

14

12

10

8

6

4

2

0

Monthlynewresidentialstartsandsales

Sales

Starts

010305070911131517192123

20

18

16

14

12

10

8

6

4

2

0

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

Exhibit3:PropertyinvestmentgrowthworsenedinMay

Percentchange,yoy

Percentchange,yoy

Fixedassetinvestmentgrowth

Manufacturing

Infrastructure

Property

2017201820192020202120222023

Source:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

Thedirectimpactofrenewedpropertyslowdownisvisibleacrossinvestment,production,andconsumptiondata.

Exhibit3

showsthatpropertyFAIgrowthslidfurtherto-10%yoyinMayfrom-6%yoyinQ1.

Exhibit4

showsthat,amongthephysicaloutputofmajorindustrialgoods,productsthatarerelatedtothepropertysector,includingcementandsteel,sawproductiondeclines.Ontheotherhand,productsthathavereceivedpolicysupport,includingnewenergyvehicles,industrialrobots,andsemiconductors,continuedtoexperiencerobustgrowth.

Exhibit5

showsthat,amongmajorretailsalesitemsreportedbylargeretailers,property-relatedgoodssuchasbuildingmaterialsandhomeappliancesalsounderperformed.

Exhibit4:Physicaloutputofproperty-relatedproductssuchascementandsteelcontractedinMay

99.7

-15-10-5051015202530

Year-on-yeargrowthofoutputbyproductinMay(%)

Source:CEIC,GoldmanSachsGlobalInvestmentResearch

Exhibit5:Retailsalesofproperty-relatedgoodssuchasbuildingmaterialsandhomeapplianceswereweakinMay

Communication

Jewelry

Auto

Clothes

Sportsequipment

Cosmetics

Householditems

Tobacco&liquor

Medicine

Furniture

Gasoline

Homeappliance

Food

Beverage

Officesupply

Buildingmaterials

-15-10-5051015202530

Year-on-yeargrowthofretailsalesvaluebyproductinMay(%)

Source:CEIC,GoldmanSachsGlobalInvestmentResearch

Inadditiontothedirecteffects,thelatestsofteninginthepropertymarketalsohasindirectinfluencesontheeconomy.Forexample,landsalesrevenueand

property-relatedtaxrevenuegrowth

fellsharply

inMay,whichinturncouldreducelocalgovernmentexpenditures.Moreover,afterfourmonthsofconsecutivesequentialincreasesearlierthisyear,the

NBS70-citypropertypricedata

suggesthousepricesdeclinedinMay,whichcoulddampenconsumersentimentandreducebroader

18June20234

consumerdemand

(Exhibit6)

.

Thereis

no“easyfix”

tothecurrentsituation.Asshownin

Exhibit7

,manyprivaterealestatedevelopershaveatoughtimegettingfundingfrombanksandcapitalmarkets,leavingpre-salesasanincreasinglyimportantsourceoffunding.Butwithpropertypricessofteningagainandconsumersentimentdownbeat,pre-salesarelookingfragile.Evenwhenpre-salestakeplace,localgovernments’tightcontrolsoverpre-salesdepositshaveleftrealestatedeveloperslessroomtomanoeuvreandmorevulnerabletocashflowproblems.That’swhyourpropertyequityanalystshavebeen

highlighting

theimportanceofextendingdeveloperdebtmaturity,optimizingpre-saledepositcontrol,andencouragingacquisitionsbySOEsastheneededsupply-sidemeasurestostabilizethepropertymarket.However,thesearenoteasyorcan’tbeimplementedquickly,inourview.

Exhibit6:PropertypricesfellinMayafterfourmonthsof

consecutivesequentialincreases

Percentmom,annualized,saPercentmom,annualized,sa

60

50

40

30

20

10

0

-10

-20

Averagehousepriceintheprimarymarket

70cityaverageTier1

Tier2

Tier3

Tier4

14151617181920212223

60

50

40

30

20

10

0

-10

-20

Source:CEIC,GoldmanSachsGlobalInvestmentResearch

Exhibit7:Developershavebeenincreasinglyrelyingonpre-salesforfunding

Percentchange,yoy

Percentchange,yoy

140

120

100

80

60

40

20

0

-20

-40

-60

-80

Fundingsourcesofrealestatedevelopers

DomesticLoan

SelfRaised

Deposits&AdvancedPayment Mortgage

1

140

120

100

80

60

40

20

0

-20

-40

-60

-80

20192020202120222023

Source:CEIC,GoldmanSachsGlobalInvestmentResearch

Themanyconstraintsfacedbypolicymakers

Withactivityinthepropertymarket(thelargestsectorintheeconomy)deterioratingsignificantlyafterQ1andexportgrowthfallingsharplyinMay,policymakerscutpolicyrates(7-dayOMOreverserepoand1-yearMLFrates)andkickedoffaneweasingcycle,showingthattheystillcareabouteconomicgrowthandarereadytostepinwhengrowthslowstobelowtheiracceptablerange.Comparedtoourbaselineassumptionatthebeginningoftheyearthatreopeningimpulsewouldgeneratestronggrowthmomentum,whichinturnwouldallowpolicymakerstonormalizepolicies,wenowthinkthegrowthheadwindsarelikelystrongandpersisting,givenhowquicklythereopeningboosthasfadedandhowchallengingithasbeentostabilizethepropertymarket.Inresponse,policymakersarelikelytoincreasepolicyaccommodations

(Exhibit8)

.

However,wedon’texpectthegovernmenttounleashlarge-scalestimulus,especiallywhencomparedwiththe2008-09,2015-16,andthe2020experience,becauseofthemanyconstraintsitfacestoday.

First,wethink“western-style”monetaryandfiscaleasingmeasuressuchascuttinginterestratestozeroorhandingcashtohouseholdsareanathematoChinesepolicymakers.Eveninearly2020,whenChinaimplementedanationalCovidlockdown

18June20235

andexportoutlookappearedprecariouswithex-ChinagoingintorecessionontheCovidpandemic,thePBOConlycutpolicyrateby30bpandthegovernmentdidnottransferincometohouseholdsthewaysomeDMcountriesdid.

Second,althoughwedoexpectmoreeasingmeasurestoboosthousingdemandandinfrastructurebuilding,theamountofstimulusthatthegovernmentiswillingtodoisconsiderablylessthanduringthe2008-09and2015-16cyclesgiventhemorechallenginglong-termdemographictrend,thealreadyelevateddebtlevels,andthe“housingisforlivingin,notforspeculation”mantra.Onhousing,wethinkpolicymakersmaycontinuetolowerdown-paymentrequirements,reducemortgagerates,andremovepurchaserestrictionsintop-tiercitiestoboostdemand.Oninfrastructure,weexpectthegovernmenttoacceleratetheissuanceoflocalgovernmentspecialbonds(withRMB1.7tnquotastillavailablefortheremainderofthisyear)

(Exhibit9)

.

Wedonotexpectanotherroundofcash-backedshantytownredevelopmentprogramsimilartothe“

three-year,18millionnewhomes

”programimplementedin2015-2017.Wealsodonotexpectissuanceofcentralgovernmentspecialbondswhichhaverarelybeenusedandonlyforveryspecialoccasions(onlythreetimes:in1998duringtheAsiaFinancialCrisis,in2007tocapitalizeChinaInvestmentCorporation,andin2020duringtheCovidpandemic).Insomesense,goingdownthesameoldrouteofusingpropertyandinfrastructuretoengineerastrongeconomicreboundwouldbeinconsistentwiththetypeof“

high-qualitygrowth

”thattheleadershiphasbeenemphasizingrepeatedly.

Exhibit8:Thegrowthandpolicymixhasshiftedtowardweakergrowthmomentumandstrongerpolicysupport

Growth

momentum

Policyeasing

StrongMediumWeak

Strong

Medium

Weak

Source:GoldmanSachsGlobalInvestmentResearch

Exhibit9:ThereisRMB1.7tnquotastillavailableforLGSBissuancein2023

RMBtn

RMBtn

Cumulativelocalgovernmentspecialbondissuance

2021

2022

2023

Shareofannual

quota:56.7%

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

JanFebMarAprMayJunJulAugSepOctNovDec*UpdatedwithissuanceplanthroughJun.21

4.54.03.53.02.52.01.51.00.50.0

Source:GoldmanSachsGlobalInvestmentResearch,Wind

Third,forpoliciesthatareconsistentwith“high-qualitygrowththeincrementalboostgoingforwardislikelysmallbecausemanyofthesepolicieshavealreadybeenputinplace.Forexample,high-endmanufacturingisakeypillarofChina’shigh-qualitygrowthplan.Butcreditextensiontotheseindustrieshasbeengrowingrapidlyoverthepastfewyears.Accordingto

PBOC’sQ1MonetaryPolicyReport,

forinstance,medium-tolong-termloanstomanufacturingindustriesincreased41.2%overthepastyear,comparedto11.8%overallbankloangrowth.Taxcutsandsubsidiesinareassuchasnewenergyvehiclesandsmallbusinesseshavealsobeenongoing.Whileweexpectsuchsupportivepoliciestocontinue,ortoincreaseonthemargin,theirimpactonGDPgrowthislikelytobelimited.

18June20236

Lastly,policymakershavebeenemphasizingtheneedforstructuralreformssuchastoremoveregionalbarriersbypromoting“

unifiednationalmarket

”andtosupporttheeconomyby

improvingbusinessenvironment.

However,thesearelong-termeffortsandunlikelytobearfruitwithinashortperiodoftime.

LoweringourGDPforecasts

Becauseofthemanyeconomicandpoliticalconstraintsfacedbypolicymakers,weonlyexpectmoderatelymorepolicyeasingthisyear

(Exhibit10)

.Formonetarypolicy,weexpectthePBOCtoalternateRRRcutsandpolicyratecutsinH2,similartothepatternobservedin2022,witha25bpRRRcutinQ3anda10bppolicyratecutinQ4.WiththeFed

hinting

atmorehikesahead,continuedmonetarypolicyeasinginChinaimpliespersistentlyelevatedinterestratedifferentialsandweaknessinCNY.Werecently

moved

ourUSD/CNYforecaststo7.2/7.1/6.9,from7.1/7.0/6.8previously,on3/6/12-monthhorizons.

Withcontinuedchallengesfromthepropertymarket,pervasivepessimismamongconsumersandprivateentrepreneurs,andonlymoderatepolicyeasingtopartiallyoffsetthestronggrowthheadwinds,wemarkdownour2023realGDPforecast

(Exhibit11)

.Q2sequentialgrowthistracking1%qoqann(vs.4.9%forecastpreviously).Weexpectgrowthtoaccelerateto6.5%qoqanninQ3(vs.5.3%previously),onthebackofpolicyeasingandthewaning

destockingpressures,

beforemoderatingto5.0%qoqanninQ4(unchanged).Thesechangesimply5.4%full-yearrealGDPgrowthfor2023(vs.6.0%previously)and4.5%for2024(vs.4.6%previously).Withthereopeningboostquicklyfading,medium-termchallengessuchasdemographics,themulti-yearpropertydownturn,

localgovernmentimplicitdebt

problems,and

geopoliticaltensions

maystarttobecomemoreimportantinChina’sgrowthoutlook.

Exhibit10:WeexpectanotherRRRcutandanotherpolicyratecutin

H2

Type

Instrument

2022

GS2023F

Monetary

RRR(eop)

DR007(20dma)7-DayOMOMLF(1-year)

LPR(1-year)

Largebanks:9.5%

Medium-sizedbanks:7.5%

Smallbanks:5.0%

1.80%(eop)

2.00%(eop)

2.75%(eop)

3.65%(eop)

Largebanks:9.0%

Medium-sizedbanks:7.0%

Smallbanks:5.0%

1.80%(eop)

1.80%(eop)

2.55%(eop)

3.45%(eop)

Fiscal

Effectiveon-

budgetdeficit

4.7%ofGDP

4.5%ofGDP

Augmentedfiscaldeficit

12.4%ofGDP

10.9%ofGDP

Credit

TSFstock

9.6%

(eopyoy)

9.5%

(eopyoy)

Housing

Housingpolicymoderateeasingmoderateeasing

FX

USDCNY

6.98(eop)

7.10(eop)

Note:RRRreferstoeffectiveRRRinsteadofbenchmarkRRR.

Source:GoldmanSachsGlobalInvestmentResearch

18June20237

Exhibit11:Weadjustdownour2023full-yearGDPgrowthforecastto5.4%

ChinarealGDPgrowthforecast

NewPreviousNewPrevious

YoY%YoY%QoQ%,SAARQoQ%,SAAR

2020

2021

2022

2023

2024

2025

2.2

8.4

3.0

5.4

4.5

4.0

2.2

8.4

3.0

6.0

4.6

4.0

2022

2023

2024

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

4.8

0.4

3.9

2.9

4.5

7.1

4.7

5.4

4.2

5.0

4.4

4.2

4.8

0.4

3.9

2.9

4.5

8.1

5.4

6.1

4.9

4.7

4.4

4.2

3.2

-8.9

16.5

2.4

9.1

1.0

6.5

5.0

4.5

4.2

4.1

4.0

3.2-8.916.52.49.1

4.95.35.04.54.24.14.0

Note:NBSseasonaladjustmentmethodsmaybedifferentfromGSseasonaladjustmentmethodsforsequentialgrowthestimates.

Source:GoldmanSachsGlobalInvestmentResearch

ChinaMatters

GoldmanSachs

18June20238

DisclosureAppendix

RegAC

We,HuiShan,MaggieWei,LishengWang,XinquanChen,YutingYangandAndrewTilton,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyreflectourpersonalviews,whichhavenotbeeninfluencedbyconsiderationsofthefirm’sbusinessorclientrelationships.

Unlessotherwisestated,theindividualslistedonthecoverpageofthisreportareanalystsinGoldmanSachs’GlobalInvestmentResearchdivision.

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