It’s Not Over Yet

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What's going on?

Two of the world’s most influential investment banks downgraded their growth forecasts for China on Monday – and you-know-what was largely to blame.

What does this mean?

America’s Goldman Sachs and JPMorgan Chase lowered their economic expectations for China across both the current quarter and the whole of 2021, following a similar move by Japanese rival Nomura last week. All three banks believe that recent measures to contain the rapidly spreading Delta variant of coronavirus will curb consumer spending – the largest component of China’s economy.

Goldman now predicts the Chinese economy will grow 8.3% this year compared to 2020, rather than 8.6%. JPMorgan expects 8.9% annual growth – also slightly lower than its previous figure of 9.1%. But Nomura thinks the impact will be more significant: it cut its forecast all the way from 8.9% to 8.2%. Still, at least China should still be on track to meet its official economic growth target of over 6%…

Why should I care?

For markets: Holding out for a hero.
It’s not all doom and gloom: China’s central bank is now expected to step in with yet more economy-boosting support. Lower interest rates and/or another cut to the amount of cash local Chinese banks have to keep in reserve should help encourage lending and spending. They could also bolster the country’s stock market, which has suffered recently from intensifying government crackdowns in several sectors.

Zooming out: Do do drugs.
Monday also brought good news in the planet’s ongoing push against the pandemic. German drugmaker BioNTech – pharmaceutical giant Pfizer’s partner in developing one of the world’s most widely used coronavirus vaccines – announced that it had now signed contracts to deliver some 2.2 billion doses of the vaccine this year, as well as over a billion more in 2022. The company accordingly increased its forecast for vaccine-related revenue in 2021 by almost 30%.

Originally posted as part of the Finimize daily email.

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