Economists see more weakness ahead for Chinese economy

Economists see a further slowdown in China’s economic growth due to the ongoing uncertainties about the global outlook.

Mingchun Sun, chief economist, Greater China at Daiwa Capital Markets, said: “With the uncertainties in the global economy and financial markets, we see a rising risk of further slowdowns in both domestic and external demand for China.”

The firm’s Daiwa China Momentum Gauge (DCMG), which tracks 20 economic indicators in China, remained unchanged at 6. However, it found 12 of the 20 indicators have softened in July compared with 11 in June.

“Therefore, we continue to see a 25% chance of an economic hard landing in China in Q4 2011 or Q1 2012,” he added. The firm defined this as real GDP growth falling below 8% year-on-year (yoy).

Meanwhile, HSBC also expects a slowdown from an almost 10% growth rate in Q4 10 – Q1 11 to around 8.5%-9% in H2.

However, the bank says the risks of a hard landing still remote while adding the People’s Bank of China (PBOC) can still afford to keep current quantitative tightening measures in place.

Qu Hongbin, chief economist for Greater China, added: “We are still expecting the economy to grow by around 9% for the year as a whole, despite Beijing’s ongoing credit tightening at home and turmoil in markets overseas.”

The bank’s preliminary reading for the country’s manufacturing index has shown a modest uptick in August to 49.8 from July’s 49.3. “This should help lower fears of a hard landing akin to 2008 autumn’s sharp slowdown,” the bank added.

 

A version of this article first appeared on Professional Adviser Singapore.

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