China GDP estimates for 2016 & 2017 slashed – Citi

FXStreet (Mumbai) – There is a growing speculation in Chinese media that the government could lower its medium term GDP growth target to 6.5% from 7% in the coming 13th Five Year plan (2016-2010 period) and analysts at Citi bank also agree with such expectations, slashing their own forecasts on China.

Apart from Citi’s downgrade of economic growth projections, they believe that the Chinese currency, the yuan, will continue to weaken against the US dollar. Citi analysts also expect inflation to remain below 2% until the end of 2016.

Key Quotes:

“The Chinese economy showed little evidence of stabilization in July. While maintaining our GDP growth forecast of 6.8% for this year, we are cutting our estimates of official GDP growth rates to 6.3% for 2016 and 6.5% for 2017 (from 6.7% and 7.1%, respectively, last month) to reflect slow economic and policy adjustments,”

“The YoY pace of growth in 1H 2016 will be particularly challenging due to base effects for the service sector. We continue to expect the political cycle may turn favorable to growth (i.e., less negative spillovers of anti-corruption) from 2H-2016.”

“Our downgrade also assumes that the growth target in the upcoming 13th Five Year Plan (2016-2020) will be reduced from 7.0% to 6.5% or even 6%.”

There is a growing speculation in Chinese media that the government could lower its medium term GDP growth target to 6.5% from 7% in the coming 13th Five Year plan (2016-2010 period) and analysts at Citi bank also agree with such expectations, slashing their own forecasts on China.

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