Goldman Sachs cuts China’s growth forecasts

CNBC reports that Goldman Sachs economists have cut their forecasts for China’s economic growth in 2021 as the world’s second-largest economy faces “yet another growth shock” in the form of constraints on energy consumption.

Goldman Sachs now expects China’s GDP to grow 7.8% in 2021 compared with a year ago — that’s lower than its previous forecast for an 8.2% year-on-year expansion.

“A relatively new, but tightening, constraint on growth comes from increased regulatory pressure to meet environmental targets for energy consumption and energy intensity,” the economists said in a Tuesday report.

In addition, regulatory tightening in other sectors and targeted restrictions to curb local Covid-19 outbreaks would also weigh down the Chinese economy, said the bank.

Goldman said production cuts among manufacturers and less fiscal support mean that the Chinese economy will grow at a slower pace in the third and fourth quarters this year.

The bank expects China’s economy to grow 4.8% in the third quarter of 2021 compared to a year ago, and 3.2% in the fourth quarter. Previously, Goldman’s forecasts were 5.1% and 4.1% for the third and fourth quarters, respectively.

China said its economy grew 7.9% year-on-year in the second quarter this year.