China’s GDP growth likely to rise to 7.2% in Q2

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A Bank of China Ltd report has predicted China’s economy to stabilize in the second quarter of this year, and GDP growth to rise from around 7 percent in the first quarter to 7.2 percent in the second.

Zhou Jingtong, a senior economist with the bank’s Institute of International Finance, said in the report on Monday that while the economy continues to slow, “we are seeing a series of positive changes emerging from the recent economic moves, such as the rapid growth of private investment and strong profit growth in the equipment and high-tech manufacturing industries”.

The tertiary sector of the economy, also known as the service sector, is growing rapidly, making it a main channel for employment, Zhou said. In the first two months of this year, service industry production increased 7.4 percent.

Statistics show that every percentage point of GDP growth created 1.79 million jobs in 2014.

The report said consumption rose 11 percent in the first two months, up 20 basis points from the previous year, and its contribution to economic growth is expected to further increase in the first quarter.

During the same period, it also showed that private investment increased 14.7 percent year-on-year and new forms of businesses related to the Internet continue to expand at a high speed. Online sales of products and services increased 44.6 percent from a year earlier to 475.1 billion yuan ($76 billion).

Fixed-asset investment, meanwhile, slowed further in the first two months, among which the growth of real estate investment fell 8.9 percentage points from the previous year.

Bank of China’s economists said they expected the housing market to remain in a relative trough, “due to a lack of momentum for recovery” in the second quarter.

They expect that the investment in real estate will grow 8-10 percent during the period, compared with 10.4 percent from January to February.

The bank expects new yuan loans to reach 10 trillion yuan to 11 trillion yuan this year, which will help stabilize the economy, and about 3.5 trillion yuan of the total will be extended in the first quarter.

“The central bank will further cut the reserve requirement ratio two or three times to inject liquidity into the market, as China’s funds outstanding for foreign exchange will continue to drop this year, thus creating a gap worth 3.5 trillion yuan between base money supply and demand,” said Li Jianjun, a financial analyst at BOC.

Analysts have said in recent days that a sharp showdown is possible in the first quarter, after a slew of indicators and forecasts suggested policymakers were under added pressure to maintain GDP growth targets, as structural changes continued to have an effect on the economy.

According to the latest data from the National Bureau of Statistics, industrial profit reached 745.24 billion yuan in the first two months, a 4.2 percent drop compared to a year earlier, after slipping 8 percent in December, 4.2 percent in November and 2.1 percent in October.

The flash manufacturing Purchasing Managers Index for March, jointly released by the HSBC Holding Plc and Markit Ltd last week, showed factory activity unexpectedly dipped to an 11-month low of 49.2 as new orders shrank.

The below-50 reading means that contraction may return to manufacturing businesses amid the persistent weakness in the world’s second-largest economy, and increase the risk of deflation.

 

 

Source : China Daily | March 31, 2015

Thomas D’Innocenzi

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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2 Responses to China’s GDP growth likely to rise to 7.2% in Q2

  1. Dan Slack says:

    What do you think the change in the PPI will have on this forecast?

  2. Dan Slack says:

    Will these trends push the PPI up and dampen growth?

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