China is to further cut its target for economic growth next year amid excess capacity, sluggish investment and weaker manufacturing, economists said.
Government leaders are set to announce a growth objective between 6.5 percent and 7 percent for next year, according to eight of 15 economists in a Bloomberg News survey conducted from Thursday last week to Tuedsay. Four said they expect a 6.5 percent goal.
All of those surveyed said they saw next year’s target falling below the goal of about 7 percent set by Chinese Premier Li Keqiang (李克強) for this year’s growth, highlighting the challenges facing the government as exports slump and investment continues to weaken.
“We believe the government will take a more flexible way than before given the descending trend of real growth,” said Janice Yu (余晶晶), a Hong Kong-based economist at Guosen Securities Co (國信證券).
Economists also reduced their forecasts for third-quarter and fourth-quarter growth from a year earlier to a median estimate of 6.8 percent for both periods, down from 6.9 percent in the previous survey.
With slowing growth and a working-age population that shrank for the first time in at least two decades last year, the Chinese Communist Party might lower its hard growth target of 7 percent to a range between 6.5 percent and 7 percent, and make that a flexible guideline, a person familiar with the discussions said last month.
China announces its targets for growth, inflation and money supply at the National People’s Congress in March. Their challenge looks even harder after a disappointing factory report.
The preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 for this month, missing the median estimate of 47.5 in a Bloomberg survey and falling from a final reading of 47.3 last month. Readings have remained below 50 since March, indicating contraction.
Daili Wang, a Singapore-based economist at Roubini Global Economics LLC, said the Chinese government would probably shoot for a 6.5 percent expansion, but amid a “heavy headwind” to growth, output next year will end up falling short of the government’s target.
Reforms of state-owned enterprises and the financial industry, plus excess supply in real estate and manufacturing, are likely to weigh on growth, Wang said.
The People’s Bank of China has lowered interest rates five times since November last year and reduced the ratio of reserves major banks are required to set aside.
The central bank is likely to cut its required reserve ratio for major banks to 17.5 percent by the end of this year and 15.5 percent by the end of next year from 18 percent, according to the median estimates in the survey.
Economists also forecast that the central bank would lower the benchmark lending rate by another quarter of a percentage point this year and that the government would expand its fiscal deficit next year.
Production at Taiwan Semiconductor Manufacturing Corp’s (TSMC, 台積電) fabs was not affected by a fire at a construction site for a water recycling facility in the Southern Taiwan Science Park in Tainan. The world’s biggest contract chipmaker said that the construction site is not adjacent to its fabs, which were unaffected. CTCI Corp (中鼎工程) is responsible for the construction of the facility, which it is to operate itself once it is completed, the chipmaker said. The facility caught fire at about 11am, and the blaze was brought under control about 30 minutes after the incident was reported, the Southern Taiwan Science Park Administration
SUBSIDIES NEEDED: Legislation to provide grants and incentives to the semiconductor industry has been stalled by lawmakers, to the frustration of chipmaker Intel Corp’s plans for a multibillion-dollar investment in a new US semiconductor plant hang in part on the US Congress moving on a stalled plan to bolster the domestic chip industry, Intel CEO Pat Gelsinger said. “The capital plans that we’ve laid out do not presume anything heroic on the part of the government, but we’d like to go bigger and faster as a result of the investments from the US government,” Gelsinger said on Bloomberg Television. Intel’s earnings report on Thursday underscored the costs of returning the world’s largest chipmaker to global industry leadership. A bipartisan push to make the US more
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday denied a report that there has been a delay in its Arizona investment project, saying the plan is on schedule. Construction of a planned 12-inch wafer foundry in Arizona started in June and equipment installation is to start in the second half of next year, TSMC said. In the fab’s initial phase, it is to produce 20,000 wafers a month starting in the first quarter of 2024, the company said. TSMC announced the Arizona project in May last year, saying it would invest US$12 billion to build the fab, which would
‘MORE IN 2022’: Chief executive Rick Tsai said the firm believes the same strengths of the past few years would bring solid revenue growth and profitability next year MediaTek Inc (聯發科) yesterday raised its revenue growth forecast for this year for the second time, buoyed by higher average selling prices and market share gains amid increasing 5G penetration worldwide. The chip designer now expects revenue to grow 52 percent from last year, up from the 45 percent growth it estimated three months ago. As a result, revenue this year would surpass NT$480 billion (US$17.24 billion), a new record and up from NT$322.15 billion last year. “The strong performance in both revenue growth and gross margin” improvement will not be limited to next year only, MediaTek chief executive officer Rick Tsai (蔡力行)