The most accurate economic analysts of China’s GDP growth and economic statistics for the last two years (according to Bloomberg tracking of their predictions) generally believe that China will have about 6.7 to 7.2% GDP growth in 2015, 2016 and 2017.
As gloom gathered over China’s economic outlook in March last year, Goldman Sachs economist Song Yu declared growth likely had “troughed” and a rebound would follow. The top forecaster on China’s economy was proven right, and sees a repeat this year.
Goldman’s Song was unfazed by an unexpected drop in April exports and says his optimism over a second-quarter rebound for the economy is buoyed by an anticipated tailwind from external demand. Goldman expects US growth will rebound this quarter in the same way it did in 2014, Song said.
On a quarter-on-quarter annualised basis, gross domestic product growth will pick up to 6.9 per cent this quarter, he estimates. Song projects GDP will expand 6.8 per cent this year – near Premier Li Keqiang’s target of about 7 per cent – and full-year growth of 6.7 per cent in 2016.
This year and next will be the bottom for China’s economic growth, with stabilisation from 2017, according to fifth-ranked forecaster Zhu Qibing of China Minzu Securities in Beijing.
Paris-based Yao Wei of Societe Generale SA, ranked third by Bloomberg, says the economy is fluctuating around a long-term downward trend and expects growth for the whole year of 6.8 per cent. She said forecasting from a different continent can help cut the noise of daily news flow.
“Policy makers understand growth has to come down,” Yao said. “So although they will take measures to avoid a hard landing, at the end of the day they will still let deceleration continue.”
“I am not as pessimistic as some China bears about growth prospects,” said second-ranked Lian Ping, chief economist at Bank of Communications Co. in Shanghai. “It’s not necessary to revise our forecasts for China’s headline GDP growth in 2015 – the range between 7 per cent and 7.2 per cent is still quite possible.”
2. Towards the end of a lengthy article about China’s economy and GDP by Michael Pettis there is a statement that Nick Lardy could be right when Lardy predicts China could have 8% per year GDP growth until 2023.
This is noteworthy because Michael Pettis is widely followed for his analysis of China’s economy and he is famous for predicting that China’s GDP growth would average 3% GDP growth per year over the period of 2011 to 2020.
I [Michael Pettis] plan to write about this balance sheet issue a lot more elsewhere, including in an upcoming review of Nick Lardy’s excellent recent book, Markets over Mao: The Rise of Private Business in China. I [Michael Pettis] believe the review will be published in the July 2014 issue of Asia Policy, the journal of the The National Bureau of Asian Research, and will feature short review essays by five to six experts, followed by a response from Lardy. The point of my [Michael Pettis] review will be to explain why what seems like a paradox is in fact not a paradox.
I [Michael Pettis] don’t think anyone has an understanding of the fundamental nature of China’s economy, its political economy institutional structure, and the evolution of its economy since the beginning of the reforms, better than Lardy. He is also very careful in his work and not prone to excess. His book explains the evolution of China’s transformation from a state dominated economy to one in which the private sector has become the engine of employment and productivity growth. This explanation leads him inexorably to the conclusion that China will continue to grow rapidly during the rest of President Xi’s administration, which is expected to end in 2023. He forecasts average growth rates as high as 8%.
I[Michael Pettis] have read his book and agree with nearly all of it, or at least I [Michael Pettis] am not smart enough or knowledgeable enough to show why he is wrong. And yet just as inexorably I conclude from his book that the risks are substantial, and that if China is able to grow on average at half that rate, Xi will deserve to be widely acknowledged as having pulled off an extraordinary feat.