Citigroup Raises China’s Economic Growth Forecast To 5%

Analysts at the American investment bank Citigroup Inc. raised China’s economic growth forecast for 2023 to 5% from the previous 4.7%, in line with the Beijing government’s economic target for the current year. Among the reasons for the “promotion,” American experts named “stabilization of economic indicators and political measures to support businesses and consumers,” which were recently adopted by Chinese President Xi Jinping.

According to Citigroup, the Chinese economy has “hit rock bottom,” and the economic steps of the Chinese authorities have exceeded all forecasts. “The cyclical bottom has arrived, and all the attention is directed to the recovery in systematic demand amid rising political dynamics,” Citigroup analysts led by renowned economist Xiangrong Yu wrote in a note.

Citigroup also noted the recent increase in industrial activity in China and said it “also expects improvements in both retail sales and China’s foreign trade.”

In August, Citigroup experts downgraded China’s economic growth forecast to 4.7%, citing disappointment with Beijing’s “low degree of central support” amid the economic slowdown following the Covid pandemic and the country’s real estate crisis, a sector that could lead to serious consequences for all of Chinese economy.

Instead, “since late August, political dynamics have clearly exceeded expectations.”

The Chinese government has intervened in the development of the residential real estate market by proposing to simplify the mechanism for applying for mortgages, deciding to expand the range of its activities. The intervention, promoted by the Ministry of Housing, the Central Bank of China, and the financial regulator, was intended to remove a rule that limited demand for mortgages. Finally, to give a boost to domestic consumption, Chinese financial authorities announced some reductions in personal income taxes.