China’s economy is facing its worst downward pressure since the spring of 2020, when it was hit by the first wave of Covid-19, according to Nomura Holdings Inc.

The slowdown in Chinese growth worsened in the first quarter and markets should worry about a further decline in the second, economists at Nomura Holdings Inc., including Lu Ting, wrote in a note on Saturday. Economic activities “could in particular deteriorate across the board” in March, weighed down by increased mobility restrictions across the country and the continued slump in the real estate sector, they said.

With outbreaks wiping out a wide range of sectors, including in-person services, construction and some manufacturing, ‘it’s becoming increasingly difficult for Beijing to meet its GDP growth target’ of around 5.5% “for 2022,” the economists said.

The investment bank cut its estimate of China’s growth from April to December, citing the worsening Covid-19 situation. While economists revised expectations for expansion in the first three months up to 4.2%, they noted that their current forecast of 2.9% could reflect the “real economic situation on the ground” quite well. “.

The upward revision mainly shows the surprisingly strong official data for the January-February period. It did not lead to a change in the bank’s annual forecasts, which stand at 4.3%.

The Chinese economy had a stronger than expected start to the year, with consumer spending, investment and industrial production all beating expectations. The outlook, however, has grown increasingly bleak as the country battles its worst Covid outbreak since it emerged in Wuhan two years ago, and Russia’s invasion of Ukraine plunges global financial markets and energy prices in turmoil.

Production activities in the country’s technology and manufacturing hub of Shenzhen and the automotive city of Changchun have been disrupted by virus control measures, while residents of Shanghai’s financial hub have been told to stay home for a while. that the city was carrying out rounds of mass testing.

China reported 5,600 new cases of Covid-19 on Saturday, the most daily infections in more than two years.

Despite the impressive official data on activity, the economists wrote, policymakers are likely to “further step up easing measures to stem what is effectively a worsening growth slowdown.” They expect the central bank to cut the reserve requirement rate for banks by 50 basis points over the next two months, and the one-year medium-term lending facility rate and the agreements rate. 7-day repo rate by around 10 basis points in April. .

It is also likely that Beijing will allow more local governments to ease local housing restrictions, they said. –Bloomberg


Read also : India is the next target for global acquisition companies, according to Nomura


About The Author

Related Posts