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HSBC lowers China's GDP estimate

2012-08-28 09:25 Global Times     Web Editor: qindexing comment

HSBC, Europe's largest bank by market value, lowered its forecast for China's gross domestic product (GDP) growth in 2012 to 8 percent from 8.4 percent amid concerns on the country's deteriorating exports and rising unemployment.

The export collapse has led to a lower projection on the GDP growth of the world's second largest economy, according to an HSBC report sent to the Global Times Monday.

Export growth dropped sharply to a mere 1 percent year-on-year last month, from 11.3 percent in June.

Many difficulties and uncertainties remain based on indicators such as sliding new export orders, the Xinhua News Agency cited Premier Wen Jiabao as saying during his recent tour to Guangdong Province.

Collapsing exports, falling corporate profits and rising inventory all increase the risk of a rise in unemployment, Qu Hongbin, HSBC's China chief economist, said in the report.

Qu said that the expectations of weaker-than-expected data will prompt the government to take more policy easing measures to support the economy, especially keeping the labor market stable will be a top policy priority, given the upcoming leadership transition.

The official unemployment rate is 4.1 percent in the second quarter of this year, according to the Ministry of Human Resources and Social Security.

The jobless rate remains unchanged since the third quarter of 2010, yet the economic growth slowed down to 7.6 percent in the second quarter of this year from 9.6 percent in the third quarter of 2010, triggering market concerns that jobless rate will rise.

HSBC had cut China's GDP forecast for 2012 from 8.6 percent to 8.4 percent in June.

"The government will retain an easing bias over the coming months among concerns about more job losses, slowing export growth and weakening demand," said Chang Jian, China economist with Barclays Capital.

Huang Shunxiang, a fund manager with UBS SDIC, told the Global Times Monday that there is still plenty of room for lowering reserve requirement ratio (RRR) and interest rates, but the government will be more cautious against a possible rise in inflation, he said.

"The central bank will likely cut interest rates one more time in the third quarter as this is more effective than RRR cuts to support demand," Chang said, noting the property price rebound will be tolerated or managed through other measures.

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