Growth Expectations Fall to ‘Lockdown Lows’

  • BofA’s survey of fund managers found that a net 0% expect a stronger Chinese economy in the next 12 months.
  • It’s a sharp decline from February, when a net 78% anticipated a stronger economy.
  • Investors noted that China’s real estate sector is the most likely source of any future credit event risk.

Our Chart of the Day is from Bank of America, which highlighted how sharply and rapidly investors’ views on the Chinese economy have plunged.

According to a fund managers surveyed by the bank, a net 0% estimated this month that China is geared for stronger growth over the next 12 months.

Describing expectations as back to “lockdown lows,” BofA noted that’s a whopping plummet from February, when a net 78% of respondents anticipated a stronger economy.

The latest figure is also below year-ago levels, when a net 2% of respondents saw stronger growth, and the lowest since the spring of 2022, when expectations were in negative territory.

February represented a peak in views and came a few months after China lifted its zero-COVID restrictions. Optimism for a boom in growth was reinforced by a strong first quarter, as eager consumers drove GDP up 4.5%.

But China’s economy has slowed sharply in subsequent months, with rapid cooldowns seen in retail sales, industrial output, exports, and investment. Meanwhile, youth unemployment has hit record highs, and the yuan tumbled.

To top that, China’s highly indebted property market has become a key concern, as defaults among large developers risk sparking a financial collapse. In fact, fund managers responding to BofA’s survey placed China’s real estate as the most likely source of a future systemic credit event. 

To deal with these issues, commentators have long hoped that Beijing would implement a large-scale stimulus program. However, debt concerns and political ideology have stood in the way, and a majority of those surveyed expect China to apply stimulus only to the real estate market.

Despite high pessimism, there have been some pockets of good news in China. According to the China Beige Book, consumer spending in travel, leisure, and dining held steady over the summer. Added to that, purchases have rebounded in the car, furniture, and appliance sectors. 

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