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.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) secured a record 70.2 percent share of the global foundry business in the second quarter, up from 67.6 percent the previous quarter, and continued widening its lead over second-placed Samsung Electronics Co, TrendForce Corp (集邦科技) said on Monday. TSMC posted US$30.24 billion in sales in the April-to-June period, up 18.5 percent from the previous quarter, driven by major smartphone customers entering their ramp-up cycle and robust demand for artificial intelligence chips, laptops and PCs, which boosted wafer shipments and average selling prices, TrendForce said in a report. Samsung’s sales also grew in the second quarter, up
LIMITED IMPACT: Investor confidence was likely sustained by its relatively small exposure to the Chinese market, as only less advanced chips are made in Nanjing Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) saw its stock price close steady yesterday in a sign that the loss of the validated end user (VEU) status for its Nanjing, China, fab should have a mild impact on the world’s biggest contract chipmaker financially and technologically. Media reports about the waiver loss sent TSMC down 1.29 percent during the early trading session yesterday, but the stock soon regained strength and ended at NT$1,160, unchanged from Tuesday. Investors’ confidence in TSMC was likely built on its relatively small exposure to the Chinese market, as Chinese customers contributed about 9 percent to TSMC’s revenue last
LOOPHOLES: The move is to end a break that was aiding foreign producers without any similar benefit for US manufacturers, the US Department of Commerce said US President Donald Trump’s administration would make it harder for Samsung Electronics Co and SK Hynix Inc to ship critical equipment to their chipmaking operations in China, dealing a potential blow to the companies’ production in the world’s largest semiconductor market. The US Department of Commerce in a notice published on Friday said that it was revoking waivers for Samsung and SK Hynix to use US technologies in their Chinese operations. The companies had been operating in China under regulations that allow them to import chipmaking equipment without applying for a new license each time. The move would revise what is known
UNCERTAINTY: A final ruling against the president’s tariffs would upend his trade deals and force the government to content with billions of dollars in refunds The legal fight over US President Donald Trump’s global tariffs is deepening after a federal appeals court ruled the levies were issued illegally under an emergency law, extending the chaos in global trade. A 7-4 decision by a panel of judges on Friday was a major setback for Trump, even as it gives both sides something to boast about. The majority upheld a May ruling by the Court of International Trade that the tariffs were illegal. However, the judges left the levies intact while the case proceeds, as Trump had requested, and suggested that any injunction could potentially be narrowed to apply
RSS