Major foreign financial institutions revise upward full-year projections

Despite persistent global headwinds, recent economic data from China have demonstrated resilience in the first half of this year, prompting major foreign financial institutions to revise upward their full-year growth projections.

As the economy faces external uncertainties and a high base effect from the previous year, experts said additional fiscal and monetary policies will be needed in the second half of the year to achieve the annual growth target of around 5 per cent. Given that China’s pro-growth policies are helping the domestic economy maintain its growth momentum in recent months, Goldman Sachs raised its forecast for China’s GDP growth in 2025 by 0.6 percentage points, from 4 per cent to 4.6 per cent.

Similarly, JPMorgan has revised China’s GDP growth forecast to 4.8 per cent year-on-year from 4.1 per cent, while Morgan Stanley has raised its projection by 0.3 percentage points to 4.5 per cent. China’s GDP grew by 5.3 per cent year-on-year in the first half of this year to 66.05 trillion yuan ($9.21 trillion), showcasing a steady economic rebound backed by supportive macroeconomic policies, the National Bureau of Statistics said on July 15.

In the first half of the year, value-added industrial output, a gauge of activity in the manufacturing, mining and utilities sectors, grew by 6.4 per cent compared to the same period last year. Retail sales, a key measurement of consumer spending, rose by 5 per cent compared to the same period last year.

Fixed-asset investment, a gauge of expenditures on items including infrastructure, property, machinery and equipment, grew by 2.8 per cent compared with a year earlier. The consumer price index, according to the bureau on July 9, rose 0.1 per cent in June from a year earlier — a turnaround from the previous four months’ decline, as the country’s consumption-boosting initiatives are translating into greater consumer confidence and spending. “The complexity, severity, and uncertainty of the current external environment are on the rise, which will undoubtedly have an impact on the stable operation of our economy,” Li Chao, a spokesman for the National Development and Reform Commission, said at a news conference in late June.

Achieving China’s 5 per cent annual growth target will demand a more forceful policy push in the coming months, with fiscal measures poised to take center stage, economists said.“ In the second half of the year, China should continue to expedite the issuance and use of the remaining quotas for ultra-long-term special treasury bonds and special-purpose local government bonds, in order to better leverage their effects in boosting investment and promoting consumption,” Luo Zhiheng, chief economist at Yuekai Securities, said.

In early July, the Ministry of Finance announced the issuance of 11 ultra-long-term special treasury bonds in the third quarter, with four of them seeing their timelines accelerated compared with the previous plan released in April. This will help maintain a continuous flow of funding to support policies meant to boost consumption, analysts said. It is possible for policymakers to expand the issuance of ultra-long-term special treasury bonds this year to provide sustained support to the consumer goods trade-in programme, should the remaining funding run out ahead of schedule, said Wang Qing, chief macro economic analyst at Golden Credit Rating International. Meanwhile, ramping up the issuance of special-purpose local government bonds is also a viable option, as it can help accelerate infrastructure investment and stabilise economic recovery, Wang added.

Analysts also expect the People’s Bank of China, the country’s central bank, to leverage its policy tool kit to maintain ample liquidity in the financial system and support domestic demand.

Citing the improved near-term growth outlook, Japanese investment bank Nomura trimmed its rate-cut forecast for the fourth quarter this year to 10 basis points from 15 basis points, while retaining estimates for a 50-basis-point cut in the reserve requirement ratio.

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