- China's economy has struggled amid a weak property sector and slowing consumer demand.
- But the country could see growth pick up this fall, Goldman Sachs' chief China economist says.
- Hui Shan pointed to fiscal easing, strong export momentum, and subsiding weather-related risks.
After a long downturn, China's economy may be poised for a turnaround, Goldman Sachs says.
Goldman's chief China economist Hui Shan pointed to fiscal easing, strong export momentum, and subsiding weather-related risks as reasons to believe the country's fortunes could soon change.
Those factors are significant as China continues to target 5% GDP growth this year, Shan said in a Sunday note.
"Activity indeed slowed in June-August, downside risks to our Q3 growth forecast increased, and the Chinese economy still faces many deep-rooted challenges. However, we expect growth to pick up in the remainder of the year as the government strives to reach the 'around 5%' GDP target that they set at the start of this year," Shan said.
First, the upside forecast is driven in part by the country's accelerated fiscal easing, Shan said. Fiscal easing has picked up in the last few weeks, likely to help secure the 5% growth target, analysts said in an earlier note.
Second, China's export momentum remains strong, with Goldman's analysts expecting last month's exports to see a 7% year-over-year increase. Other economists, though, foresee August's export growth slowing to 6.5%, according to a Reuters poll.
Third, Shan says the country's weather-related risks from the summer are likely subsiding, with Goldman's high-frequency tracker showing a reverse in weather-related weakness.
With those risks easing, China's struggling property sector could get a much-needed boost. Data released last month showed China's fixed-asset investment grew 3.6% year-over-year in the first half of the year, short of expectations of 3.9%, as infrastructure investment slowed due to heavy rainfall and flooding.
Those potential upsides to China's economic growth come after months of gloomy data, fueled by collapsing property sales and starts in the last few years as a large portion of the country's available housing supply remains vacant.
China's consumer demand, meanwhile, has raised warning signs as consumer spending remains weak even as household incomes rise. Retail sales of consumer goods grew just 2% year-over-year in June, but jumped to 2.7% growth in July.
China's tech sector has also faced headwinds, with earnings growth slowing to its lowest level since 2022. That's helped lead a downturn in the overall market, with the latest earnings per share falling 4.5% year-over-year on the MSCI China Index, according to Bloomberg.