China’s Second Quarter GDP Growth Could Hit 7%, Real Estate Transactions Set to Contract This Year: Great Wall Securities


A leading securities house in China forecasts that the country’s year-on-year GDP growth could hit 7% in the second quarter, due to recovery from the low baselines set during renewed rounds of Covid lockdowns in 2021. The Chinese real estate sector is not expected to mount a significant recovery however, with further adjustments to monetary policy likely necessary.

“As of March 26th in the first quarter of this year, we have combined published economic data and high-frequency data to roughly estimate that GDP growth is around 4.1%, with consumption expenditures, capital formation, and net exports driving growth of approximately 2.2/2/-0.1 percentage points respectively,” said a report from Great Wall Securities published on Tuesday.

“It is expected that GDP in the first quarter of this year will be around 4.3%. In addition, due to the low base effect from the second quarter of last year, GDP in the second quarter of this year is expected to experience a significant rebound in year-on-year terms, possibly reaching around 7%.”

Great Wall has raised its annual GDP growth forecast for China from 5% to around 5.2%, due to the lifting of constraints on regular travel and production caused by the pandemic, and the real estate recovery at the beginning of the year arriving faster than expected.

“The actual growth rates of final consumption, capital formation, and net exports according to the GDP expenditure method may be 7.2%, 4.1%, and -15.6% respectively, driving GDP growth by approximately 3.9, 1.8, and -0.5 percentage points respectively,” the report said.

According to Great Wall, two main themes of China’s economic recovery in 2023 will be consumption and real estate.

“In terms of consumption, the constraints on residents’ travel have been lifted, but the tendency to save is still relatively high, and consumer confidence is insufficient.

“The characteristics of consumption in January and February are that offline catering and travel-related consumption rebounded strongly, while durable goods such as cars and mobile phones saw only weak growth, which may also be a reflection of the consumption situation this year.

“Looking ahead, the overall consumption growth rate this year is expected to experience an ‘N-shaped’ rebound, and the year-on-year growth rate of social consumer goods retail sales may recover to around 7%.”

With regards to real estate, Great Wall argues that the proactive policies for the sector at the beginning of the year and the impact of the pandemic have led to sudden release of suppressed real estate demand.

“The year-on-year sales area of national real estate in January and February saw a -3.6% YoY change, which was better than our previous forecast.

“However, the real estate market may still be in an adjustment period throughout the year. We believe that a certain degree of interest rate reduction is still needed this year to ensure that the actual real estate interest rate remains at a low level.

“Therefore, the year-on-year growth rate of real estate transactions may shrink to around -4%, and the corresponding real estate investment growth rate may rebound to 0%.”