China shows signs of recovery, but analysts urge caution – 04/14/2024 – Market

Signs of recovery in the Chinese economy at the beginning of the year led some of the main Western banks, such as Citi, Goldman Sachs and Morgan Stanley, to raise their forecasts for GDP (Gross Domestic Product) growth in 2024, in the last two weeks. On Friday (12), UBS joined the movement.

Citi, Goldman and UBS reached the 5% or “around 5%” projected by the Chinese regime itself as a target for the year. Morgan Stanley, which was at 4.2%, now speaks at 4.8%. Two data in particular are cited by institutions for new bets.

The Caixin industrial activity index, the main financial publication in China, reached its fifth consecutive month of expansion in March. According to a note from Goldman Sachs, “it suggests that the Chinese economy bottomed out at the end of 2023 and is rising.”

The other data was the three-day long weekend last week, the so-called Qingming festival, which saw higher spending by Chinese consumers than before the pandemic, at the same event.

AMRO, an international macroeconomic support organization for Southeast Asian governments and allies, went further and spiked 5.3%, projecting the stabilization of the Chinese real estate sector, with expansive effects on the entire regional economy.

A firmer indication of what to expect from China’s economy this year should come next Tuesday (16), when Beijing announces GDP for the first quarter.

One bank that has avoided being included in the review over the last two weeks is the Brazilian Bradesco. Fabiana D’Atri, economist at Bradesco Asset Management, was in Beijing until two weeks ago and suggests caution.

“There are signs of recovery on the supply side, but the demand side still has room to improve,” he says. “We have a GDP growth projection of 4.7%, which includes the expectation of a slight acceleration throughout this year, assuming that this divergence between supply and demand will continue to be present.”

Regarding the holiday numbers, he says that “consumption has been slowly recovering, but there is still a lot of caution on the part of families.” He cites confidence rates “at very low levels, largely reflecting the ongoing adjustment of the real estate sector.”

It does not follow AMRO’s optimism for the sector. “Our scenario is that it will stabilize this year and gradually grow again in 2025, considering both sales and launches of residential properties. The adjustment of the real estate sector will take a long time.”

Asked about possible effects of the American electoral campaign and military threats in the South China Sea, D’Atri assesses that the geopolitical environment can bring noise and uncertainty. “The risk of tariff increases, as well as the increase in protectionist measures, should not be ruled out.”

AMRO also sees “geoeconomic fragmentation” as a growing risk. When asked, Michael Pettis, finance professor at Peking University, assesses that “if there are trade conflicts, it will be particularly difficult for China to achieve the growth target” of around 5%.

“But it’s still too early to say,” he adds. “Things at the beginning of the year are better than expected, but still not by much. And the first quarter is always complicated because [da semana de férias] of Chinese New Year, which distorts information.”

He suggests waiting another month, until the April data, to get a clearer idea of ​​what 2024 will be like in the Chinese economy.