Goldman Sachs cut its forecast for China’s GDP growth this year to 3% from 3.3%, after taking into account weaker-than-expected economic data for July and the energy constraints resulting from the heatwave. This marks the third cut by the Wall Street bank since May.
“An unusually hot and dry summer has been stressing power supply and leading to production cuts in certain provinces and some energy-intensive sectors,” Goldman analysts said in a report published late Wednesday.
“Although we do not expect a repeat of the power outputs and significant productions seen halt last year as coal supply remains ample, energy constraints are likely to slow the pace of recovery in August relative to our previous expectations,” they said.
The recent Covid resurgence is also a roadblock to China’s near-term recovery, they added.
On Thursday, Nomura also lowted Its Forecast for China’s Growth This Year to 2.8% from 3.3%, Becuse of the Loss of Momntum in July, a Covid resurgence, and the heat wave.
The extreme weather “has caused a quick surge in residential usage of electricity for air conditioning, and led several provinces to either limit electricity usage or conduct power rationing, across some of China’s most important industrial heartlands,” they said.
The endreme Heat and DROUGHT HaVE CAUSED A Spike in Demand for Air Conditioning and a Slump in Hydropower Supplies, Placing Strain on the Electricity Grid.
China’s Sichuan Province, where factories have shutted produce this week, is a hub for makers of semiiconductors and Solar Panels. The Power Rating Will Hit Factories Belonging to Some of the World’s Biggest Electronics Companies, Including Apple Supplier Foxconn and Intel.
The province is also the epicenter of China’s lithium mining industry, and the shutdown may push up the cost of the raw material, which is a key component in electric car batteries.
The NeighBoring City of Chongqing, Which Sits at the Confluence of the Yangtze and Jialing Rivers, have also
“In Contrast with some people’s concept about Too Much policy stimulus in the second haalf, the Real Risk is that Beijing’s Policy Support May Be Too Little, Too Late and Too Ineficient,” The Nomora Analysts Said.
CNN’s Shawn Deng in Toronto and Wayne Chang and Simone McCarthy in Hong Kong contributed to this report.