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Credit Suisse slashes China growth forecast to 7.7%
By Wang Yanlin |
June 14, 2012, Thursday
|
Online Edition
Online Edition
CREDIT Suisse Group AG today cut its forecast for China's economic growth this year to 7.7 percent - the latest firm to lower its GDP estimate after the world's second largest economy weakened.
Credit Suisse said the slashed forecast was based on China's falling corporate profits and an investment slowdown.
"Investment is unlikely to see a meaningful rebound in the foreseeable future," said Tao Dong, chief China economist at Credit Suisse, predicting the country will face "years of weak growth."
But the bank's estimate was still higher than the government's target, which was lowered to 7.5 percent this year from a previous 8 percent in place since 2005.
The government set the target during the 12th Five-Year Plan (2011-2015) period at 7 percent to reflect the need for economic restructuring. The plan gives priority to improving people's livelihoods while taking into account global economic uncertainties.
In April, the World Bank adjusted its estimate to 8.2 percent growth this year from 8.7 percent. The Asian Development Bank also lowered its projection to 8.5 percent from 9.1 percent, citing external risks that threaten China's exports.
China's economy showed signs of stabilization in May with a stronger-than-expected rebound in trade, and improving performance in industrial production.
To stimulate growth, China has introduced subsidies for energy-efficient product purchases, sped up approval of new investment projects, accelerated tax reform, and expanded private capital in fields formerly dominated by state-owned firms.
Last week, China lowered interest rates to spur domestic demand. The People's Bank of China had cut the reserve requirement ratio in May to allow more liquidity in the banking system.
Some economists said China could stage a recovery in the second half if these measures prove effective.
But Zheng Xinli, deputy head of the China Center for International Economic Exchanges, said economic growth could drop below 7 percent in the current quarter if there is no significant improvement in economic data for June.
China's gross domestic product expanded 8.1 percent from a year earlier in the first three months, the sixth straight quarterly slowdown and the weakest in nearly three years.
Credit Suisse said the slashed forecast was based on China's falling corporate profits and an investment slowdown.
"Investment is unlikely to see a meaningful rebound in the foreseeable future," said Tao Dong, chief China economist at Credit Suisse, predicting the country will face "years of weak growth."
But the bank's estimate was still higher than the government's target, which was lowered to 7.5 percent this year from a previous 8 percent in place since 2005.
The government set the target during the 12th Five-Year Plan (2011-2015) period at 7 percent to reflect the need for economic restructuring. The plan gives priority to improving people's livelihoods while taking into account global economic uncertainties.
In April, the World Bank adjusted its estimate to 8.2 percent growth this year from 8.7 percent. The Asian Development Bank also lowered its projection to 8.5 percent from 9.1 percent, citing external risks that threaten China's exports.
China's economy showed signs of stabilization in May with a stronger-than-expected rebound in trade, and improving performance in industrial production.
To stimulate growth, China has introduced subsidies for energy-efficient product purchases, sped up approval of new investment projects, accelerated tax reform, and expanded private capital in fields formerly dominated by state-owned firms.
Last week, China lowered interest rates to spur domestic demand. The People's Bank of China had cut the reserve requirement ratio in May to allow more liquidity in the banking system.
Some economists said China could stage a recovery in the second half if these measures prove effective.
But Zheng Xinli, deputy head of the China Center for International Economic Exchanges, said economic growth could drop below 7 percent in the current quarter if there is no significant improvement in economic data for June.
China's gross domestic product expanded 8.1 percent from a year earlier in the first three months, the sixth straight quarterly slowdown and the weakest in nearly three years.
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