Nomura cuts its China GDP forecast — again

• As of Tuesday, about 12% of China's total GDP is affected by Covid controls on a weighted basis — up from 5.3% last week, Nomura's chief China economist Ting Lu and a team said.
• Nomura cut its full-year GDP forecast to 2.7%, down from the 2.8% estimate set in August.
• Several cities including the tech hub of Shenzhen have tightened Covid controls in the last few weeks after reports of new local infections.

Shoppers buy groceries at a wet market as Chengdu imposes a lockdown to curb a new Covid-19 outbreak on Sept. 1, 2022.

Chen Yusheng | Visual China Group | Getty Images

BEIJING — Nomura has cut its China GDP forecast again due to new Covid lockdowns.

Several cities including the tech hub of Shenzhen have tightened Covid controls in the last few weeks after reports of new local infections. Since last week, the central Chinese city of Chengdu has ordered people to stay home while authorities conduct mass virus testing.

As of Tuesday, about 12% of China's total GDP is now affected by such Covid controls — up from 5.3% last week, Nomura's chief China economist Ting Lu and a team said in a report. That's according to the analysts' new model that weights the GDP of affected areas by how stringent the measures are.

Based on that increase, Nomura cut its GDP forecast to 2.7%, down from the 2.8% estimate set in August.

We did not expect growth to worsen at such a pace.

Ting Lu

Nomura's Chief China Economist

"Back [on Aug. 17], when we cut our Q3 and Q4 GDP growth forecasts, we did not expect growth to worsen at such a pace," the analysts said.

Major investment banks have repeatedly cut their China GDP forecasts this year, especially after the metropolis of Shanghai locked down for about two months. Nomura has had the lowest forecast and has typically cut its estimates before other firms have.

For Tuesday, mainland China reported 323 locally transmitted Covid cases with symptoms and 1,247 without symptoms. Regions ranging from north China to the southeastern coast reported infections.

Restrictions on business and social activity vary by region. While many cities such as Beijing may only require regular virus tests, other parts of the country have delayed the reopening of schools or even ordered people to stay home.

"What is becoming increasingly concerning is that Covid hotspots are continuing to shift away from several remote regions and cities – with seemingly less economic significance to the country – to provinces that matter much more to China's national economy," the Nomura analysts said.

They warned their new model showed the Covid impact on China's GDP was quickly nearing levels seen during the lockdown of Shanghai in April and May. At the time, the weighted impact on GDP was just over 20%, according to Nomura's analysis.