Chinese Monthly Update – April 2012
The Chinese economy decelerated further at the start of 2012, with real GDP growth at its slowest pace in around […]
- The Chinese economy decelerated further at the start of 2012, with real GDP growth at its slowest pace in around three years (rising 8.1 per cent over the year to the March quarter – NAB forecast was for 8.2 per cent). By component, consumption made the largest contribution to growth over the year, while investment made its smallest contribution in at least 3 years. Net exports detracted from growth.
- Partial indicators suggest that domestic demand has slowed gradually, and external demand remains soft – poor demand from Europe will remain an ongoing theme. The property market continues to look downbeat, but authorities are likely to keep property curbs in place for now.
- In the near term, we believe that China can still engineer a soft landing, although more policy loosening will be needed. We expect growth to slow to around 8 per cent in 2012 and 2013, consistent with potential, but we still view risks as weighted to the downside.
- Our expectations for policy loosening include a number of cuts to the reserve ratio requirement (RRR) in 2012, and one cut to the lending rate later in the year (contingent on CPI inflation falling below 3 per cent).
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