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China economic growth may slow to 6.8% in 1st half, Deutsche Bank says
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GROWTH in China’s gross domestic product may cool down to its floor level of 6.8 percent in the first half of this year due to weaker property investment and less income on land transaction fees, Deutsche Bank said in a report published today.
“A further cooling down in economic growth will appear in the first two quarters and then growth will rise back to about 7 percent in the second half of the year along with government’s stimulus measures,” said Zhang Zhiwei, chief China economist and head of China equity strategy at Deutsche Bank in the report. Zhang added that the bank expects two more interest rate cuts as well as two more reductions in banks’ reserve requirement ratio in the coming year.
The report also listed a downturn of government revenues due to less income gained through land transaction fees as the biggest risk for China’s economic growth in 2015. Government revenue may show its first negative growth in the first quarter and post its slowest annual growth level since 1981, the bank warned.
China’s economic growth eased to a five-year low of 7.3 percent in the third quarter of last year, down from 7.5 percent in the second quarter, led by the decline of the property sector.
The State Information Centre, a top state think tank, said last week that a real estate industry adjustment of three to five years will influence negatively the nation’s economy, which is expected to grow around 7 this year.
Despite that property sales have turned positive and credit growth has remained strong in December, Wang Tao, chief China economist with UBS, pointed out in a Monday report that new property starts and manufacturing investment have likely remained frail, reflecting a still weak domestic demand.
Wang expected GDP in the fourth quarter of last year may slide further to 7.1 percent year to year, taking full year growth to 7.3 percent, while China's consumer price index (CPI) is expected to stay low at 1.4 percent in December due to declining fuel prices and lackluster consumer demand.
The official Purchasing Managers' Index fell to 50.1 in December from 50.3 in November, according to data released on Jan 1by statistics bureau and the China Federation of Logistics and Purchasing in Beijing, suggesting a weaker consumer to blame.
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