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Goldman Boosts China’s Growth Outlook on Manufacturing

Goldman Boosts China’s Growth Outlook on Manufacturing
People walk under lanterns hanging in a street in Beijing, China, 05 February 2024. The Chinese Lunar New Year, also called 'Spring Festival', will fall on 10 February 2024 and marks the beginning of the Year of the Dragon. EPA-EFE/WU HAO

Goldman Sachs Group Inc. raised its outlook for China’s economic growth this year as factory activity accelerates more than expected.

China’s economy likely expanded at a 7.5% annualized pace in the first quarter from the prior three months, Goldman economists led by Hui Shan said in a note Wednesday — higher than their 5.6% prior estimate. The bank now sees 2024 growth forecast at 5%, in-line with Chinese policymakers’ target, versus 4.8% previously. It kept the 2025 projection at 4.2%.

The world’s second-largest economy has struggled to regain momentum as the property sector and consumer spending remain weak, though data so far this year have shown green shoots in factory activity and trade. Data next week is set to show the economy expanded at a 5% year-on-year pace in the first quarter from 5.2% at the end of last year, according to forecasts.

Goldman’s revision comes after a key gauge of factory activity — the Caixin manufacturing PMI — indicated a fifth straight month of expansion in March, with official government data also showing a rebound. Exports have also increased amid rising global demand for technology goods.

“Recent China macro data have been solid,” Goldman’s economists wrote in the note, adding that the manufacturing data “suggests the Chinese economy found a local bottom in late 2023 and is on the way up.”

Goldman also cited robust tourism, with spending above pre-pandemic levels during the Qingming festival last week. Inventories also grew in the first quarter, according to Goldman’s internal metric, which add to growth when calculating gross domestic product.

Goldman’s 2024 estimate compares with the average estimate of 4.6% growth in last month’s Bloomberg survey of economists.

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