Nomura cuts China GDP forecast as power crunch drags down growth

CNBC reports that Nomura’s Chief China Economist Ting Lu cut his forecast for Chinese GDP growth this year as factories shut down to comply with carbon emissions reduction targets.

As a result, he expects China’s GDP to grow by 7.7% this year, down from 8.2% previously forecast.

Chinese President Xi Jinping announced in September 2020 that China would reach peak carbon emissions by 2030 and become carbon neutral by 2060. That’s kicked off national and local plans to reduce production of coal and other carbon-heavy processes.

Fitch on Thursday lowered its China growth forecast to 8.1% from 8.4% on expectations a slowdown in the property market puts pressure on domestic demand.

Other economists haven’t cut their 2021 China GDP forecasts yet, but are watching a rising number of drags on growth.

Macquarie’s Chief China Economist Larry Hu said in an email Monday his 8.5% GDP estimate, set a year ago, is “facing downside risk now, given property slowdown and production cut.”

China Renaissance’s Bruce Pang, head of macro and strategy research, said Monday the firm hasn’t yet changed its GDP forecast of 8.4% either. But he said there could be a downward revision to 8.25% or 8.3% if the electricity shortage is prolonged, hitting not just energy-intensive industrial manufacturing but local livelihood and even services.