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China may see further rate cut in Q3: survey

(China Daily)

15:54, July 20, 2012

BEIJING -- China's economy is likely to recover modestly in the third quarter of 2012 in response to policy stimulus, snapping six consecutive quarters of slower growth, but the full-year rate of expansion will be weaker than in 2011, a Reuters poll shows.

With Beijing intensifying policy fine-tuning to boost growth, analysts reckon the world's second-largest economy probably bottomed out in the second quarter, when growth cooled to 7.6 percent from a year earlier, the slowest pace in more than three years.

The median forecast by economists polled by Reuters showed annual economic growth could pick up to 7.9 percent in the third quarter of 2012 and 8.2 percent in the fourth quarter.

"Economic growth could rebound modestly from the third quarter as policy steps take effect," said Zhao Qingming, an economist at China Construction Bank in Beijing.

But the full-year growth rate is expected to dip to 8.0 percent this year from 9.2 percent in 2011, before picking up to 8.4 percent in 2013, given the growing headwinds from global economic uncertainties and softening demand at home.

Of the 43 economists surveyed, 17 predicted GDP growth could slip below the 8 percent mark seen by many as the minimum rate needed to ensure job creation is sufficient to absorb the millions of migrant workers who head to the cities from the countryside each year.

The forecast is weaker than the 8.4 percent consensus in the previous quarterly poll in April and even below the 8.2 percent anticipated in a snap poll in May after the central bank cut 50 basis points from required reserve ratios.

"Looking at the short-term cycle, China's economy may have touched the bottom in the second quarter. But in the long run, the growth rate will continue to slow from the previous years," said Wei Yao, China economist at Societe Generale in Hong Kong.

The trajectory of the economy is crucial for investors facing anemic growth not only in developed countries but across the BRIC grouping of major emerging economies - Brazil, Russia, India and China - which combine as the biggest marginal generators of global growth.

The People's Bank of China is expected to further loosen monetary policy in the second half to head off a sharper slowdown.

The central bank is seen delivering its next interest rate cut in the third quarter, cutting both deposit and lending rates by 25 basis points, according to the poll.

The poll also produced a consensus view that the central bank would cut banks' reserve ratio in two, 50-basis-point steps, one each in the third and fourth quarter of the year, to bring the rate down to 19 percent by the end of 2012.

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