BofA Merrill Lynch Cut China Growth To 7.2% This Year

Bank of America Merrill Lynch has cut China’s GDP growth in 2014 to an annual rate of 7.2% from its previous forecast of 7.6%, according to a report released by the bank.

The cut came after weak economic data witnessed during the first two months of the year.

The bank also cut first quarter growth to 7.3% from a previous 8% projection, and it expects growth to rise to 7.5% during the second quarter, and then moderate to 7.1% during the second half of the year.

The weak growth during January and February could be due to the government’s anti-pollution measures, which shut down many small cement and steel mills in China.

The escalation in the anti-corruption and anti-vice campaign also slowed consumption. The cyclical slowdown of the property sector, and the lagged impact of an appreciating RMB are other factors that contributed to the weakness.

The bank says it now believes the Chinese government could lower its growth floor from 7.5% last year to around 7.0% this year.

This means there won’t be any stimulus measures soon, such as a cut in Chinese banks’ reserve requirement ratio.

China Expert network