Major Western Banks Still See High Growth For China in 2019

China economy growth
FILE PHOTO: Steel pipes to be exported are seen at a port in Lianyungang, Jiangsu province, China December 8, 2018.
(Photo: REUTERS/Stringer CHINA STRINGER NETWORK)

A day after China issued the surprising news its GDP grew 6.4 percent in the first quarter, major Western banks issued widely varying guidance reflecting either their certainty or uncertainty as to China's ultimate growth for the year.

China is officially targeting growth to range from 6.0 percent to 6.5 percent this year.

J.P. Morgan Chase, the largest bank in the United States, expects "solid growth momentum" from China in the second and third quarters with Beijing's massive stimulus continuing to prop up the economy. Its economists estimate the effects of the stimulus will eventually weaken by the end of the year, however. As a result, the bank retained its overall growth forecast for this year at 6.4 percent.

British multinational bank Standard Chartered PLC also kept its full-year GDP growth prediction at 6.4 percent. At the same time, it warned against "risks of being over-optimistic about China's growth outlook."

Singapore-based DBS said the first-quarter showed "some degree of stabilization" in China's economy based on data that included retail sales, industrial production, manufacturing, and non-oil imports.

"Nothing is rosy," said Taimur Baig, DBS Group Research chief economist. "China is on a structural slowdown path. But stable growth and perhaps a little bit of upside, I think, is real, not just a one-off."

Spanish banking group BBVA, estimates "hard landing" concerns for China's economy have faded. It acknowledged a "certain upside risk" to their full-year forecast of 6.0 percent growth.

BBVA reckons the fundamentals of China's economy "are not as solid as the headline figures showed." It said Trump's trade war can still negatively impact growth, adding the economy is still dependent on stimulus. "It is unlikely to see a quick rebounding of growth in the coming months," said the bank's economists

On the other hand, Barclays PLC, the ING Group and Citigroup Inc. took the opposite and more positive view about China's growth prospects for the year.

Economists at Barclays raised their GDP growth expectation for this year to 6.5 percent from the previous 6.2 percent, citing the unexpected first-quarter growth result.

It said this growth was boosted by "greater impact" from Beijing's stimulus measures and other factors such as an improving housing and property market and a rosier export outlook.

Citi raised its annual GDP forecast to 6.6 percent from 6.2 percent, citing a more optimistic outlook for a U.S.-China trade deal and stronger domestic demand.

"Our new baseline scenario is that a framework trade deal between the U.S. and China will be reached in (the second quarter) and it will lift most, if not all, existing punitive tariffs," said Citi economists.

ING upgraded its forecast to 6.5 percent from the previous 6.3 percent. It called stimulus-fueled infrastructure projects and 5G telecoms production the "real growth engine" in the first quarter.

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