JPMorgan, Citi Predict China’s Growth Outlook: U.S. Dollar Buckles

Paigambar Mohan Raj
Source: DW

After China’s GDP (gross domestic product) beat Q1 2023 estimates, financial giants, JPMorgan and Citi, have raised their growth outlook for the eastern superpower. China reported a 4.5% increase in its GDP for the first quarter of 2023. The US Dollar dipped on Tuesday, following China’s Q1 results. JPMorgan increased its 2023 growth prediction for China from 6% to 6.4%. Meanwhile, Citi increased its forecast from its earlier expectation of 5.7% to an above-consensus view of 6.1%.

As per JPMorgan’s chief China economist Haibin Zhu, China’s Q1 results “points to a strong post-reopening recovery.” Zhu further added that China’s growth would continue in the near term. However, the economist added that growth momentum may soften in the second half of this year.

Citi also supported the view that there is room for further growth. Citi economists said that the growth likely started after the Chinese New Year. Moreover, they added that “the underlying momentum could be stronger than the headline number suggests.”

Besides Citi and JPMorgan, UBS also increased its annual projection for China from 5.4% to 5.7%. According to Morgan Stanley, due to China’s low levels of inflation, an average 4.8% quarterly increase in the remaining months of the year “could be overachieved”. Morgan Stanley economists stated,

“Sequential growth may soften in 2Q as growth YTD was partly supported by pent-up demand and catch-up in labor-intensive exporters.”

Is China’s growth a concern for the U.S. Dollar?

It is no secret that the Eastern superpower has grown leaps and bounds in the last few decades. China is fast in pursuit to take the spot of the biggest economy in the world. However, there is also the fear of dethroning the U.S. Dollar, as the international standard currency.

As reported previously, the BRICS (Brazil, Russia, India, China, and South Africa) nations are attempting to move away from the US Dollar, for intermediary trading. Furthermore, the Whitehouse revealed that there is evidence that China may want to weaken the US Dollar.

Although there are several fronts to consider before such fears are realized, there is no denying the decrease in the Dollar’s stature. Nonetheless, the US Dollar still accounts for 88% of all international transactions, far ahead of China’s Yuan, at 7%.