J.P.Morgan, ANZ raise 2023 China GDP forecast

China's factory output and retail sales grew at a faster pace in August, but tumbling investment in the crisis-hit property sector threatens to undercut a flurry of support steps that are showing signs of stabilizing parts of its wobbly economy. Haibin Zhu, economist at JPM, said that government growth-stabilization policies announced since mid-August have been incremental but extensive, and will likely seep into the real economy in the coming months.

J.P.Morgan and ANZ on Friday raised their 2023 economic growth forecast for China, after August economic numbers offered some signs of stabilization in the world's second-largest economy.

Both raised their GDP forecast by 20 basis points each to 5% and 5.1% respectively, with JPM saying notable recovery in retail sales and rise in service activity were the biggest surprises. China's factory output and retail sales grew at a faster pace in August, but tumbling investment in the crisis-hit property sector threatens to undercut a flurry of support steps that are showing signs of stabilizing parts of its wobbly economy.

Haibin Zhu, economist at JPM, said that government growth-stabilization policies announced since mid-August have been incremental but extensive, and will likely seep into the real economy in the coming months. Zhu said additional fiscal and housing policy relaxation like subsidy for product-specific consumption support, relaxation of home buying restrictions, sales restrictions and price controls in tier-1 and 2 cities may follow in the near term.

"On the cautious side, while demand-side easing in the housing market is a welcome step, real estate investment will likely remain sluggish," JPM said. Goldman Sachs kept its third-quarter GDP growth forecast unchanged at 4.9% but said China's economy is still in a tug of war between persistent growth headwinds and increasing policy support.