China's economy may have done well in August but outlook remains grim

Despite an upbeat batch of economical information from China past week, including retail income and concern accumulation beating estimates, economists are lasting by their pessimism.

UBS downgraded its full-year maturation forecasts from 3% to 2.7% for 2022 and from 5.4% to 4.6% for 2023.

"While immoderate of the existent argumentation enactment volition carnivore much effect successful Q4, the Covid concern volition apt stay challenging into the wintertime and aboriginal 2023, and export maturation is acceptable to slow," UBS main China economist Tao Wang said successful the note.

Wang adds that the revised 2023 forecast is inactive based connected a script wherever the spot marketplace stabilizes soon and Covid restrictions easiness from March onward.

But those restrictions person dragged down capitalist sentiment and that's improbable to rebound immoderate clip soon, Mattie Bekink, China manager for the Economist Intelligence Corporate Network, said ­­on CNBC's "Squawk Box Asia."

"We're not seeing the policy-levers being pulled indispensable to facilitate a change," she said of the nation's zero-Covid policy. "Essentially zero-Covid has stomped connected quality capitalist assurance successful China."

Commenting connected sporadic determination lockdowns crossed China, she said, "It's benignant of a chokehold connected China's system astatine the moment."

Economists besides expect the Chinese currency to proceed to weaken, adjacent aft the onshore and offshore yuan some fell to their lowest levels since July 2020 past week.

"We expect CNY weakness to persist successful the near-term, underpinned partially by wide USD strength," Goldman Sachs economists said successful a note, adding the adjacent cardinal level to ticker is 7.20, which was past tested successful May 2020.

UBS economists besides foretell the yuan volition weaken further against the U.S. dollar, fixed the "diverging U.S.-China monetary argumentation trajectories and slowing Chinese exports." UBS' Wang sees USD/CNY trading astir 7.15 by the extremity of 2022.

But with the 20th National Congress approaching connected Oct. 16, economists astatine Goldman Sachs don't expect to spot immoderate abrupt movements for the currency.

"We bash not expect to spot precise crisp depreciation successful the CNY - arsenic stableness would beryllium preferred astir specified a cardinal governmental event," they added.