Goldman Sachs Group Inc cut its growth forecast for China this year to 10.1 percent from 11.4 percent as government restrictions on lending and real estate slow expansion in the world’s third-largest economy.
Asian stocks fell after the report fanned concern the global recovery is losing steam. The US investment bank joins BNP Paribas, Macquarie Securities Ltd and China International Capital Corp (CICC, 中國國際金融) in reducing estimates for expansion in the fastest-growing major economy.
Meanwhile, the government raised its growth estimate for last year by 0.4 percentage point to 9.1 percent.
A third of China economists may reduce their “overly bullish” forecasts for this year and next year in coming weeks mainly due to the government’s property tightening measures, Bank of America-Merrill Lynch economist Lu Ting (陸挺) said in a note to clients on Wednesday.
The slowdown will help avert overheating and ensure the economy cools toward a “healthy soft landing,” Deutsche Bank economist Ma Jun (馬駿) said yesterday.
AGGRESSIVE TIGHTENING
“China’s growth has been slowing down sharply and the tightening measures we saw in April on property have been quite aggressive,” Isaac Meng (孟原), a Beijing-based economist at BNP Paribas, said in a phone interview yesterday.
The government won’t “launch easing measures in the short term as the major concerns, especially about the property bubble, haven’t been fully addressed,” he said.
BNP this week reduced its growth forecast for this year for China to 9.8 percent from 10.5 percent.
Macquarie cut its estimate to 9.5 percent to 10 percent from a previous 10 percent to 10.5 percent last month and CICC said in May that growth would likely ease to 9.5 percent from a previous estimate of 10.5 percent.
Manufacturing in China, the world’s biggest maker of computers and mobile phones, expanded at the slowest pace in 16 months, a survey of purchasing managers showed yesterday.
Stocks declined as the report added to concerns that a cooling China combined with austerity measures in Europe and slower growth in the US may undermine the global recovery.
Still, economists say the moderation in China’s growth is a sign that the government is moving the country to a more sustainable pace of expansion after a 4 trillion yuan (US$591 billion) stimulus package drove an 11.9 percent rebound in the first quarter.
“The June PMI data confirms that the manufacturing sector still remains in a solid expansion stage,” Sun Mingchun (孫明春), a Hong Kong-based economist at Nomura International, said in a note yesterday.
“If the decline does not continue for too long, it should prove a healthy correction that reduces the risk of the economy overheating,” Sun said.
“The momentum of growth has moderated as expected, but we do not see a sharp slowdown in China,” Liu Ligang (劉利剛), economist at Australia & New Zealand Banking Group Ltd, said in Hong Kong. “With this moderation, this will be a good thing for policymakers that they don’t have to tighten excessively.”
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure