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Nomura cuts Chinese GDP forecast again

Shoppers buy groceries at a wet market as Chengdu imposes a lockdown to curb a new Covid-19 outbreak on September 1, 2022.

Chen Yusheng | Visual Group China | Getty Images

BEIJING — Nomura has cut its Chinese GDP forecast again due to new Covid lockdowns.

Several cities, including tech hub Shenzhen, have tightened Covid controls in recent weeks after reports of new local infections. Since last week, the city of Chengdu in central China has ordered people to stay at home while authorities carry out mass virus testing.

As of Tuesday, around 12% of China’s total GDP is now affected by these Covid controls – up from 5.3% last week, Nomura’s chief China economist Ting Lu and a team said in a report. . This is according to the analysts’ new model which weights the GDP of the affected areas according to the stringency of the measures.

Based on the increase, Nomura cut its GDP forecast to 2.7%, down from August’s estimate of 2.8%.

We did not expect growth to deteriorate at such a rate.

Ting Lu

Nomura’s Chief Chinese Economist

“Return [on Aug. 17]when we lowered our GDP growth forecast for the third and fourth quarters, we did not expect growth to deteriorate at such a pace,” the analysts said.

Major investment banks have repeatedly slashed their Chinese GDP forecasts this year, especially after metropolitan Shanghai was locked down for about two months. Nomura had the lowest forecasts and generally cut estimates before other companies.

For Tuesday, mainland China reported 323 locally transmitted Covid cases with symptoms and 1,247 without symptoms. Regions from northern China to the southeast coast have reported infections.

Restrictions on business and social activities vary by region. While many cities like Beijing only require regular virus testing, other parts of the country have delayed school reopenings or even ordered people to stay home.

“What is becoming increasingly concerning is that Covid hotspots continue to move away from several remote regions and cities – with seemingly lesser economic importance to the country – towards provinces that matter much more to the country. Chinese national economy,” Nomura analysts said.

They warned their new model showed the impact of Covid on China’s GDP was rapidly approaching levels seen during Shanghai’s lockdown in April and May. At the time, the weighted impact on GDP was just over 20%, according to Nomura’s analysis.

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