• Goldman Sachs and Citigroup have revised China's growth projections to 4.7% due to slowing industrial output.
• The slowdown has led to global brokerages revising their 2024 projections for China's economy below the government's target of 5%.
• China's industrial output in August expanded by only 4.5% year-on-year, marking a significant slowdown.

In a development that has sent ripples across the global economic landscape, two of the world's leading financial institutions, Goldman Sachs and Citigroup, have revised their growth projections for China's economy for the year.

The new projection stands at 4.7%, a significant drop from their previous estimates. This downward revision comes in the wake of China's industrial output slowing to a five-month low in August, a clear indication of the weakening economic activity in the world's second-largest economy.

The economic slowdown in China has been a cause for concern for economists and policymakers worldwide. The August data has further intensified the focus on China's sluggish economic recovery, underscoring the urgent need for additional stimulus measures to bolster demand.

The slower-than-anticipated growth has led global brokerages to revise their 2024 projections for China's economy, which now stand below the government's target of around 5%.

Previously, Goldman Sachs had projected a full-year growth rate of 4.9% for the Chinese economy, while Citigroup had forecast a slightly lower growth rate of 4.8%. However, the recent data from the National Bureau of Statistics (NBS) has prompted a reevaluation of these figures.

Industrial Output and Retail Sales Slowdown

According to the NBS, China's industrial output in August expanded by a mere 4.5% year-on-year, marking a significant slowdown from the 5.1% pace in July. This is the slowest growth rate since March, highlighting the challenges faced by the Chinese economy.

Retail sales, a crucial indicator of consumption, also witnessed a slowdown in August. The growth rate stood at 2.1%, a deceleration from the 2.7% increase observed in July.

This slowdown was attributed to extreme weather conditions and a peak in summer travel. Analysts had initially expected retail sales, which have been lackluster throughout the year, to grow by 2.5%.

In a note dated September 15, Goldman Sachs expressed its concerns about China's economic outlook. The financial giant stated, We believe the risk that China will miss the 'around 5%' full-year GDP growth target is on the rise, and thus the urgency for more demand-side easing measures is also increasing.

Banks' Projections and Historical Similarities

Despite the downward revision for 2024, Goldman Sachs maintained its 2025 GDP growth forecast for China at 4.3%. Citigroup, on the other hand, trimmed its 2025 year-end forecast for China's GDP growth to 4.2% from 4.5%. The bank cited a lack of major catalysts for domestic demand as the primary reason for this revision.

Economists at Citigroup emphasized the need for fiscal policy interventions to break the austerity trap and provide timely support for growth.

This situation is reminiscent of the 2008 global financial crisis when China's economy also faced significant headwinds. However, through a combination of fiscal stimulus and monetary easing, China managed to weather the storm and maintain robust growth rates.

As the world watches, the steps taken by China in the coming months will be crucial in determining the trajectory of its economic recovery. The world's second-largest economy's ability to navigate these challenges will have far-reaching implications for global economic stability.