China | Growth outlook weakens, despite expected policy easing

We’ve cut our China growth forecast for Q4 to 3.6% y/y from 5%, and for 2022 to 5.4% from 5.8%. This is despite our expectation of a shift in economic policy in Q4 to support growth.

What you will learn from this report:

• While Evergrande’s problems are unlikely to trigger a Lehman moment, they will aggravate the ongoing property sector slowdown.
• Firms in many parts of the country are facing electricity shortages or production cuts, largely caused by strict implementation of climate and safety targets by local governments. We expect the supply side constraints to be eased in coming months. Even so, however, we expect China’s GDP growth will slow significantly in Q4.
• In response to the weakening outlook, we expect policymakers to take additional steps to support growth in the coming months.