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Foreign-Invested Institutions Boost Growth Forecasts for China’s Economy in 2024

Beijing, July 07, 2024, The Europe Today: As China maintains a steady economic growth momentum, foreign-invested institutions are increasingly optimistic about the country’s economic prospects, raising their growth expectations for 2024. This renewed confidence has drawn growing attention to Chinese assets.

Several institutions, including Barclays and Goldman Sachs, have adjusted their forecast for China’s GDP growth rate in 2024 to 5 percent, up from 4.4 percent and 4.8 percent, respectively. Fitch Ratings has also revised its estimates from 4.5 percent to 4.8 percent. The World Bank recently updated its forecast, predicting a GDP growth rate of 4.8 percent in 2024, an increase of 0.3 percentage points from its December 2023 forecast.

The ASEAN+3 Macroeconomic Research Office (AMRO) reported strong macroeconomic fundamentals for China, citing falling unemployment, rising per capita disposable income, and booming strategic emerging industries across multiple provinces. AMRO’s estimation for China’s 2024 GDP growth stands at 5.3 percent.

Industry insiders believe the collective upward revision of China’s economic growth forecasts by international institutions reflects robust confidence in China’s economic resilience and potential.

Hu Yifan, chief investment officer and macroeconomic director for Asia Pacific at UBS Wealth Management, projected a 6-percent growth in China’s consumption for the year. “Service sector consumption is expected to show resilience first, particularly in industries such as travel, transportation, hotels, restaurants, and box offices, which have shown relatively evident growth surpassing 2019 levels,” Hu said.

Amid macroeconomic stabilization and recovery, foreign institutions are showing increased interest in Chinese assets at low valuations. Wendy Liu, chief Asia and China equity strategist at J.P. Morgan, noted that J.P. Morgan has been fully bullish on Chinese equities since October 2023. “China has shown significant economic recovery, which is conducive to the performance of A-shares and Hong Kong stocks, further supporting stock valuations,” Liu said.

Nomura highlighted that valuations in consumer sectors such as catering and social services are at historically low levels, making them attractive investments amid global uncertainty.

The continuous deepening of comprehensive reforms in China’s capital market and institutional opening up has also facilitated global capital investment in the Chinese market. In April, China’s State Council released a guideline aimed at strengthening regulation, mitigating risks, and promoting high-quality development of the capital market. The guideline calls for optimizing the cross-border interconnection mechanism of the capital market and broadening financing channels for overseas listing of enterprises while enhancing international securities cooperation.

Zhu Hexin, deputy governor of the People’s Bank of China, stated at the Lujiazui Forum in Shanghai that China will simplify and improve fund management for the dollar-denominated Qualified Foreign Institutional Investor scheme (QFII) and its yuan-denominated sibling, RQFII. “We are revising relevant fund management regulations,” said Zhu, who is also the head of the State Administration of Foreign Exchange, calling for efforts to facilitate foreign investors’ participation in domestic securities investment and promote financial market connectivity.

Since 2020, more than 300 qualified foreign institutional investors have completed foreign exchange registration, reflecting the growing interest and confidence in the Chinese market.