Why Goldman Sachs Cut China GDP Forecast, But Remains Positive On Chinese Stocks

Goldman Sachs lowered its 2022 expectations for China's economic growth to 4.3%, compared to a previous forecast of 4.8%.

On CNBC, Kinger Lau of Goldman Sachs said the reason for lowered GDP expectations is the current COVID-19 restrictions in China following the spread of omicron variant. He added that China is going to maintain its zero-covid policy in a bid to control the spread of the pandemic.

China is expected to incur higher economic costs for its zero-tolerance strategy during the current omicron wave in comparison to the earlier outbreaks. However, Lau has a positive outlook for Chinese stocks this year, considering their attractive valuations.

It is also possible that the country might change its zero-covid strategy due to the economic headwinds China is expected to face, he added.

Price Action: China’s Shanghai Composite Index gained 0.84% to close at 3,597.43, while Shenzhen Component jumped 1.39% to 14,421.20 on Wednesday.

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