News
Top banks trim China growth, rule out rate rise this year
Investment banks Goldman Sachs and JPMorgan trimmed their 2008 growth forecasts for China and ruled out any interest rate rises this year after the government said growth slowed to 10.1 per cent in the second quarter.
Economists at both banks said they expected China to continue increasing banks' required reserve ratio, strengthening the yuan and controlling bank loans, although JPMorgan noted the possibility of some relaxation of these measures if growth slows more sharply.
Rate rises, however, would be off the table this year, as Beijing is loath to widen the yuan-dollar interest rate differential and invite more of the capital inflows that have so complicated China's monetary policy, both banks said.
China has imposed lending quotas and ordered banks to set aside a record 17.5 per cent of deposits as reserves to soak up cash flooding the economy from trade, FDI and investors betting on gains by the yuan.
Standard Chartered drastically scaled back its forecast for interest rate rises to no rises in the lending rate for rest of the year. It had previously expected four rate rises in 2008.
Goldman Sachs revised down its projections of gross domestic product growth to 10.1 per cent for 2008 and 9.5 percent for 2009, which would mark the first time growth dropped below double digits since 2002.
Previously, Goldman had called for 10.5 per cent growth this year and 10 per cent next year.
Goldman economists said lower contributions from net exports and investment would serve as drags, while consumption would remain strong.
They also changed their interest rate projections, dropping an earlier forecast for two rate rises by the end of the year.
Annual gross domestic product growth slowed to 10.1 per cent in the second quarter from 10.6 per cent in the first three months of the year and 11.9 per cent in all of 2007, the National Bureau of Statistics said earlier.
Economists at both banks said they expected China to continue increasing banks' required reserve ratio, strengthening the yuan and controlling bank loans, although JPMorgan noted the possibility of some relaxation of these measures if growth slows more sharply.
Rate rises, however, would be off the table this year, as Beijing is loath to widen the yuan-dollar interest rate differential and invite more of the capital inflows that have so complicated China's monetary policy, both banks said.
China has imposed lending quotas and ordered banks to set aside a record 17.5 per cent of deposits as reserves to soak up cash flooding the economy from trade, FDI and investors betting on gains by the yuan.
Standard Chartered drastically scaled back its forecast for interest rate rises to no rises in the lending rate for rest of the year. It had previously expected four rate rises in 2008.
Goldman Sachs revised down its projections of gross domestic product growth to 10.1 per cent for 2008 and 9.5 percent for 2009, which would mark the first time growth dropped below double digits since 2002.
Previously, Goldman had called for 10.5 per cent growth this year and 10 per cent next year.
Goldman economists said lower contributions from net exports and investment would serve as drags, while consumption would remain strong.
They also changed their interest rate projections, dropping an earlier forecast for two rate rises by the end of the year.
Annual gross domestic product growth slowed to 10.1 per cent in the second quarter from 10.6 per cent in the first three months of the year and 11.9 per cent in all of 2007, the National Bureau of Statistics said earlier.