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Goldman Cuts China GDP Growth Forecast On Energy Supply Crunch

Goldman Sachs says China faces “significant downside pressures” from energy shortages and has cut the country’s economic growth forecast for 2021 to 7.8%, from 8.2%.


A man walks near a coal-fired power plant in Harbin, Heilongjiang province, China, in Nov 2019. Photo: Jason Lee, Reuters.

 

Goldman Sachs has cut China’s economic growth forecast for 2021 to 7.8%, from 8.2%, as energy shortages and deep industrial output cuts add “significant downside pressures”, it said in a note on Tuesday.

China’s power supply crunch has been brought about by controls to reduce emissions, supply constraints and soaring prices of coal.

This has forced industries throughout the country to cut production, and left several provinces scrambling to guarantee electricity and heating for residents.

Goldman Sachs estimated that as much as 44% of China’s industrial activity has been affected, leading to a 1-percentage point decline in annualised GDP growth in the third quarter, and a 2-percentage point cut from October to December, it said.

China’s economy is already grappling with curbs on the property and tech sectors and concerns around the future of grossly indebted real estate giant China Evergrande.

“Considerable uncertainty remains with respect to the fourth quarter, with both upside and downside risks relating principally to the government’s approach to managing the Evergrande stresses, the strictness of environmental target enforcement and the degree of policy easing,” Goldman added.

 

• Reuters with additional editing by Jim Pollard

 

ALSO SEE:

What Is Behind China’s Power Supply Crunch?

China’s Power Crunch Begins To Weigh on Economic Outlook

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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