Ahead of tonight’s key China data dump, State Grid, China’s largest utility company, has warned the rate of economic growth in the country could plunge to 4% within the next four years, according to internal forecasts, first seen by the Financial Times. The state-owned utility has turned bearish on the Chinese economy. It forecasts a rapid slowdown that has already dented energy demand across all 23 provinces and could last until 2024.
Already, ten of the company’s 25 regional operations reported a loss in 2019, according to company insiders, resulting in decreased capital expenditures. One official from the utility company, who asked not to be identified, said the economy was booming, and generally, that meant internal estimates about the economy were overly bullish. But now, it appears the exact opposite, and internal estimates show China’s economy is decelerating while official GDP estimates are up.
“We used to be more bullish than the market consensus,” the official said. “Now, we are doing the opposite.”The Times notes that State Grid’s infrastructure spending has been a reasonably good barometer of China’s investment-driven economy. That is because infrastructure investment, in State Grid’s case, has been driven by the government. With the decreased investment, this suggests a slowdown in the economy is expected to persist through 2020. Last month, the People’s Bank of China (PBoC) said the economy is expected to remain in a slump for the next five years, essentially confirming State Grid’s bearish economic outlook.