Economists Trim China Growth Forecasts, See More PBOC Easing

China’s economic outlook is showing no signs of improvement, with forecasters broadly trimming their expectations for growth, prices and trade and predicting more monetary policy easing.

(Bloomberg) — China’s economic outlook is showing no signs of improvement, with forecasters broadly trimming their expectations for growth, prices and trade and predicting more monetary policy easing.

Economists now see gross domestic product expanding 5.1% in 2023 from the prior year, according to the median estimate in the latest Bloomberg survey. That’s down from an earlier expectation of 5.2% and brings projections closer to the government’s target of about 5% — a number widely seen as conservative when it was set in March. 

The downgrade is attributable in part to lower projections for growth in the third quarter: Economists now see GDP expanding 4.4% in the July-to-September period from a year ago, down from an earlier expectation of 4.6%. Growth is expected to slow to 4.5% in 2024, down from a projection of a 4.8% expansion previously. 

The growth momentum is slowing “due to a worsening residential property investment decline and a drag from poor export numbers,” said Mike Gallagher, director of research at Continuum Economics. The research firm sees GDP expanding 4.9% this year. 

China has as much as a 30% chance of experiencing a “hard landing” this year despite the nation’s efforts at stimulating the economy using fiscal and monetary policy, Gallagher added. 

The pessimism comes as recent data showed the economic outlook worsening for China. Bank loans plunged to a 14-year low last month, while deflation is setting in and exports are contracting. 

The weak economic figures have spurred some action by Chinese officials. The People’s Bank of China this month lowered the rate on its one-year loans by the steepest amount in three years. But even with that interest rate cut — the second this year — Beijing has refrained from unleashing massive stimulus implemented in past downturns. 

Economists see the PBOC trimming that policy loan rate — called the medium-term lending facility rate — by another 10 basis points in the final three months of the year. 

They also projected a 10 basis-point reduction in the five-year loan prime rate, a key rate that guides mortgages. That rate was unexpectedly kept on hold last week, reflecting the government’s difficulty in balancing the need to safeguard the banking system’s stability with trying to boost confidence. 

Economists also maintained projections that the central bank would cut the reserve requirement ratio, or the amount of cash lenders have to keep in reserve, by 25 basis points this quarter.

Expectations for more support have also circulated in Chinese state media. The central bank may consider cutting the RRR in the fourth quarter to improve liquidity in the financial market, according to a front-page report in the China Securities Journal on Tuesday which cited analysts. 

Liquidity in the domestic money market has tightened recently mostly due to an increase in local government bonds, despite the PBOC’s policy rate cut earlier this month, according to the report. The possibility of another interest rate cut can’t be ruled out, according to the report, citing Wen Bin, chief economist at Minsheng Bank.

The economists surveyed by Bloomberg all trimmed their forecasts for major indicators. They now see consumer prices increasing just 0.7% in 2023, down from an earlier projection of 0.9%. The consumer price index declined in July for the first time since February 2021.

Other key highlights from the survey: 

  • GDP seen expanding 1% in the July-to-September period from the prior quarter, down from a projection of 1.2% growth in the previous survey
  • China’s producer prices seen contracting 3% for the full year, compared with a prior survey estimate of a 2.7% decline
  • Exports are likely to fall 3% in 2023, compared with a 2.3% drop in the prior survey
    • Imports seen declining 5.6% this year, compared with a projected 2.8% decrease previously

–With assistance from Jasmine Ng.

(Updates with details from state media about a potential RRR cut in 11th paragraph.)

More stories like this are available on

©2023 Bloomberg L.P.