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Rabobank flags China demand weakness and deeper real estate drag
Rabobank expects Beijing to lean on renewed consumption subsidies and two additional PBoC rate cuts of 10 bps each later this year, while forecasting slower growth ahead.
FXStreet highlights Rabobank’s view that China’s GDP growth missed expectations in the second quarter, citing weak domestic demand and a worsening real estate crisis as ongoing headwinds. The outlet notes that Rabobank pointed to July data showing GDP growth of 4.7% year to date, or 4.3% year over year, versus economists’ expectations for slightly higher growth rates.
Rabobank argues that stronger retail sales and imports do not yet prove a sustained rebound in domestic demand, and links suppressed consumer sentiment to continuing stress in the real estate sector. It expects policy makers to respond by returning subsidies and other measures aimed at incentivizing consumption.
Looking ahead, Rabobank says China’s shift away from an investment and export led model toward consumption will likely come with structurally lower growth. FXStreet also reports Rabobank’s forecast that growth could come in below China’s 4.5% to 5% target, with Rabobank expecting growth of about 4.5% this year and around 4.2% next year, alongside two minor PBoC rate cuts of 10 bps each for the remainder of the year.
Rabobank also warns that China’s trade partners may become increasingly critical of the current trade relationship, potentially expanding to countries in the Global South. FXStreet says the implication in Rabobank’s analysis is that China may need more serious reforms sooner to rebalance growth toward domestic consumption.