Wall Street Highlights – Macro

While GS’ US colleagues adjusted down their US GDP forecast last week on the back of small bank stress and its negative impact on bank lending, GS revised up their China GDP forecast after the official release of the January-February activity data. Their 6% real GDP growth forecast is above consensus expectations (Bloomberg consensus: 5.3%) but does not require aggressive assumptions on the speed of recovery from here. Take restaurant services as an example, even if there were no sequential improvements during the rest of the year from the January-February levels, full-year growth would reach 19%. Bottom line, reopening will provide a strong growth impulse this year.

In terms of property demand, the National Bureau Statistics of China (NBS) 70-city property price data showed the largest sequential increase (+3.4% mom annualized) since May 2021. In their high-frequency tracker, the 30-city daily property transactions increased 45% year on year (yoy) as of mid-March. As flagged by GS’ equity analysts, Beke’s data suggest China’s existing home sales value in February was close to its historical peak in March 2021. To be sure, the likely outperformance of the top-tier cities, last March’s low base, potential pent-up demand after the Covid “exit wave”, and seasonal adjustment difficulties around January-February probably have made it difficult to assess the underlying strength of the sequential improvement in the property market nationwide. That said, more signs are pointing to stabilizing property demand in China.

Two pieces of policy news hit the wire late last week. The first was the unveiling of the Chinese Communist Party’s institutional reform plan, which includes establishing the Central Financial Commission to oversee financial work and the Central Science and Technology Commission to push forward innovation. This plan indicates a structural trend of more Party control over areas such as the financial sector and technological advancement. The second was the PBOC’s announcement of a 25bp RRR cut, which was surprising given the large medium-term lending facility (MLF) operation two days earlier to inject long-term liquidity. GS interpret the move as the new government’s desire to send a “pro-growth” signal and perhaps to be extra cautious on liquidity management amid significant banking stress overseas.