China What do local clients think about the economy Local marketing takeaways July 2023(1)pdf
China What do local clients think about the economy Local marketing takeaways July 2023(1)pdf
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  1. China’s sequential economic growth slowed meaningfully in Q2 and marketparticipants expected more policy easing measures to be announced to supportgrowth. We talked with onshore clients in Beijing over the past few days. Theseclients range from asset managers in insurance companies and mutual funds, toprivate equity funds. Below are a few key takeaways from our client conversations.1. Slightly more optimistic about near-term growth compared to April, butmore cautious about long-term growth outlookIn general, local clients still expected slightly above 5% real GDP growth this year.However, in contrast to the pessimistic view in April, many local clients expectedsequential activity growth to have bottomed in Q2 this year and to improve in 2H.Local clients mentioned 1) the stabilization of inventory changes (in comparison tothe destocking trend in Q2); 2) a gradual but continued recovery of consumption; 3)potentially better export growth on the back of solid external demand, and 4) morefiscal support as the reasons behind a better growth outlook in 2H. However, despitethe seemingly less pessimistic view for the near-term growth outlook, local clientsare still quite cautious about the long-term growth outlook for China. They shared thesame view as offshore investors on the lack of growth drivers for the Chineseeconomy in the long run, although some local clients mentioned manufacturingupgrading and technology sector could support China’s long-term growth. 2. Mixed views about the property market outlookWhile overall sentiment towards economic growth among onshore investorsappeared somewhat better than April, local clients had mixed views about theproperty sector outlook. Pessimistic arguments pointed to structural imbalancesbetween top-tier and lower-tier cities’ property markets, while the slightly moreoptimistic arguments mainly included the delayed help from recent property policyeasing in top-tier cities (e.g., Qingdao), and the expectation that property policieswould be eased further if property indicators deteriorate further. 3. Low expectations onpolicy easing and structural reforms in the near-termLocal clients held low expectations for policy easing and structural reforms this year.While local clients agreed overall policy stance would be more supportive in thenear-term compared with Q2, local clients viewed these additional easing measuresas “policy put” to reduce growth headwinds, rather than to generate strong growth.Local clients did not expect major policy easing measures or structural reformMaggie Wei+852-2978-6962 | maggie.wei@gs.comGoldman Sachs (Asia) L.L.C.Hui Shan+852-2978-6634 | hui.shan@gs.comGoldman Sachs (Asia) L.L.C.Lisheng Wang+852-3966-4004 |lisheng.wang@gs.comGoldman Sachs (Asia) L.L.C.Xinquan Chen+852-2978-2418 |xinquan.chen@gs.comGoldman Sachs (Asia) L.L.C.Yuting Yang+852-2978-7283 |yuting.y.yang@gs.comGoldman Sachs (Asia) L.L.C.Andrew Tilton+852-2978-1802 | andrew.tilton@gs.comGoldman Sachs (Asia) L.L.C.China: What do local clients think about the economy? Local marketingtakeaways July 20235 July 2023 | 7:04PM HKTInvestors should consider this report as only a single factor in making their investment decision. For Reg ACcertification and other important disclosures, see the Disclosure Appendix, or go towww.gs.com/research/hedge.html.
  2. measures to be rolled out in the July Politburo meeting. Local clients agreed thatstructural reforms, such as any solutions to the property problem or local governmentfinancing challenges, would not be announced soon, as onshore policymakers stillappeared to be exploring different policy options. The most frequently asked questions among local investors include our estimate onChina’s potential growth in the medium to long run, the property market outlook, ourview on US-China relations, and expectations on the US Treasury secretary Janet Yellen’sChina visit. In comparison, offshore clients appeared more pessimistic than onshoreclients about the near-term growth outlook in recent weeks after the disappointingApril/May data. Offshore clients’ most frequently asked questions include the long-termgrowth drivers for the Chinese economy, our expectation for policy easing this year, andthe property market outlook. 5 July 20232Goldman SachsChina
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