China's GDP projection cut but IMF confident of future

China's economic volatility in recent months has spurred some financial institutions to slash their forecast, although the International Monetary Fund is confident about the future of the world's second-largest economy.

Wang Tao, an economist at UBS, predicted China's gross domestic product may grow 7.2 percent this year, below the government target of 7.5 percent, and then slow to 6.8 percent in 2015.

Her forecast echoed Goldman Sachs, which cut its third and fourth-quarter growth projection to 7.1 percent from the previous 7.3 percent and 7.2 percent respectively. The US bank expected China's growth to ease to 7.3 percent this year, and 7.1 percent next year.

However, the IMF said yesterday that China's economy will grow faster than previously thought in 2015, downplaying risks of the cooling property market in the country.

"We expect China has many tools to maintain the growth rate well above 7 percent next year," Changyong Rhee, director of the Asia and Pacific department at IMF, said at a briefing in Manila.

There were fears whether the Chinese economy could meet its growth target of 7.5 percent for this year after industrial production, fixed-asset investment and retail sales all weakened in July and August.

UBS' Wang said the property sector poses the biggest threat to the economy because falling housing prices, sales and new construction have a negative effect on related sectors from home appliances to glass, steel and cement. She suggested lower interest rates and relaxing down payment restrictions for home buyers to bolster the market.

Rhee said: "Evidence shows there will be a gradual adjustment in the real estate market but we have to watch if that baseline scenario will hold."

Chinese leaders have agreed the economic focus for the rest of the year would be to "put reform ahead of stimulus and accept growth could come in below the 7.5 percent target." Premier Li Keqiang has said the government would not be distracted by minor fluctuations in individual performance indicators.