China’s economic rebound seems unlikely in the near term, according to Bank of America (BofA), which has revised down its growth projections for the world’s second-largest economy. The downgrade reflects concerns that Beijing is hesitant to implement more aggressive monetary easing to stimulate growth.
BofA has cut its forecast for China’s real GDP growth to 4.8% for 2024, down from an earlier estimate of 5.0%. The outlook for 2025 and 2026 has also been lowered, with expected growth now at 4.5% for both years, down from the previous forecast of 4.7%.
The reduced forecast comes amid what BofA describes as insufficient policy easing, ongoing confidence challenges, and slower investment growth, all of which are hindering Beijing’s attempts to reignite its economy. Strong economic growth seen in the first quarter of the year has weakened in the following months, according to BofA economists.
Consumer confidence has also taken a hit, reaching its lowest levels since China emerged from pandemic restrictions, which in turn is weighing on household spending.
Investment growth has slowed, with the property sector acting as a drag on the economy. This decline has largely overshadowed gains in manufacturing and infrastructure sectors, contributing to the overall economic slowdown.
BofA’s report highlighted that China’s economic momentum appeared to falter in the second and third quarters of 2024, following a promising growth spurt in the first quarter.
However, export growth has been a notable bright spot, driven by strong external demand and stabilization in the global technology sector, BofA economists noted.
Despite this, the likelihood of more substantial monetary easing from Beijing remains slim unless export growth significantly weakens. BofA warned that potential trade frictions in the coming months could serve as a trigger for a shift in policy.
