U.S. and Chinese Economies Headed in Opposite Directions, says Goldman Sachs

Differences in Economic Recovery Post-COVID-19 in Two Countries
Factors Hindering China’s Economic Growth

President and COO of Goldman Sachs, John Waldron, has expressed a negative outlook on the Chinese economy. Unlike the U.S. economy, which shows signs of recovery after the COVID-19 pandemic, the Chinese economy is expected to remain in a slump for some time.

In a CNBC interview on the 14th, Waldron expressed that the Chinese economy is grappling with challenges that are currently impeding its growth. He added that the trajectory of China’s economy seems to be diverging from that of the United States.

Perception of Negative Energy in China
Positive Energy in the U.S. Economy

Waldron analyzed that China is still experiencing severe economic difficulties, citing his recent visit. He argued that this contrasts sharply with the steady growth, robust consumer demand, stock market rally, and 2024 soft landing forecast of the U.S.

Moreover, he felt “negative animal spirits” in China, emphasizing, “It didn’t feel like America, when we had positive animal spirits when the economy was coming back from COVID. I feel like That’s the opposite of China,” he said.

Waldron asserted that China’s failure to exhibit a similar post-COVID-19 recovery as other major economies stemmed from a shortage of government policy in China.

Impact of Weakened Consumer Demand
Real Estate Market Issues and Debt Crisis

Furthermore, he observed that unlike the U.S. or Europe, China hasn’t adopted substantial fiscal or monetary stimulus measures in its economy. He highlighted the recent price decline, attributing it to deflation driven by weakened consumer demand. He also pointed out the escalating debt issues of major real estate developers, destabilizing the Chinese real estate market.

As a result, foreign investors’ appeal to the Chinese market has also dropped, according to Waldron’s analysis. In fact, according to data from China’s State Administration of Foreign Exchange, foreign investment in China recorded a negative for the first time in the third quarter of this year.

Waldron said the Chinese economy is “going to have to deal with some real structural challenges” and predicted, “While China is focused on it and they’ll achieve it, but it’s going to take some time, and I think they’re going to continue to move below trend for quite some time.”

By. Deung Yong Jung