Fitch Cuts China’s Growth Forecast to 8.1% on Property Curbs By Bloomberg

Fitch Cuts China’s Growth Forecast to 8.1% on Property Curbs By Bloomberg

© Bloomberg. An under construction residential housing development in Shanghai, China, on Thursday, July 29, 2021. Chinese policy-making bodies collectively issued a three-year timeline for bringing “order” to the property sector, long under scrutiny due to an excessive buildup of leverage among home-buyers and developers. Photographer: Qilai Shen/Bloomberg

(Bloomberg) — Fitch Ratings lowered China’s economic growth projections for 2021 and 2022 as a slowdown in the property market weighs on domestic demand.

Gross domestic product is forecast to expand 8.1% this year, down from a previous projection of 8.4%, while the forecast for 2022 was cut to 5.2% from 5.5%, the ratings company said in a statement Thursday, based on its global report released last week.

Read More: China Vows Better Policy Support to Economy as Headwinds Mount

The cooling in the property sector is the key driver behind the forecast downgrades, although pandemic-related restrictions imposed in July and August also weighed on China’s recovery, it said.

Other highlights from the statement:

  • Residential investment directly accounts for about 10% of GDP and property activity has large spill-overs to other industries
  • The economic slowdown has already prompted a recalibration of macroeconomic policy settings, such as a call for acceleration in special bond issuance, but the moves will take some time to gain traction
  • While Fitch Ratings does not expect reductions in benchmark interest rates, the reserve requirement ratio is likely to be cut again later this year following a 50 basis-point reduction in July

©2021 Bloomberg L.P.

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