China’s zero-tolerance approach towards Covid-19 is also expected to stifle recovery momentum as border controls and sporadic lockdowns dampen business activity and consumer confidence.
DWS has revised this year’s overall growth outlook for Asian emerging markets downwards as the region continues to struggle against a surge in Covid-19 infections driven by the Delta variant. The German asset management firm downgraded its growth forecast from 7.9% to 7.3%. Underpinning this is a lower 2021 growth forecast for China at 8.2%, down from 8.7% previously. According to Sean Taylor, chief investment officer APAC and head of emerging markets at DWS, the trimmed forecast reflects the uncertainties looming over investor sentiment in China after it rolled out a series of tightened regulations for its internet, education and real estate sectors.
The lower forecast also takes into account softer economic data that came out of China in July, which potentially points towards a faster-than-expected slowdown. China’s y-o-y retail sales growth slowed to 8.5% in July, lower than the consensus forecast of 11.5% according to analysts polled by Reuters. Other key indicators such as industrial production and fixed asset investments also missed market expectations.
