Citigroup warns on China growth

Analysts at Citigroup Inc have warned that economic growth this year might be lower than estimates, as inflation pressures restrict government efforts on further loosening in the second half.

The US banking giant predicted on Monday that China's GDP growth in 2013 will be 7.8 percent.

It expects the central bank to raise interest rates in the fourth quarter and the first quarter of next year, by 25 basis points each time, which would further drag growth to 7.3 percent in 2014.

Oliver Chiu, head of research and investment advisory in the wealth management unit of Citibank (China), said the government will set the GDP target at 7 percent, but actual growth will be between 7.5 and 8 percent.

He added that during the second half of the year, the rate of inflation based on the consumer price index could reach as high as 3.5 percent.

Citi's less optimistic forecast comes as most analysts adjusted their growth estimates upwards, following the pick-up in China's economy during the fourth quarter of 2012.

Standard Chartered Bank said on Monday it has upgraded its 2013 GDP growth forecast for China to 8.3 percent, from a flat rate of 7.8 percent.

It said it expected quarter-on-quarter growth to accelerate in the second half of this year, before cooling in the second half of 2014.

Citi's Chiu said that although China's growth will remain relatively high, the biggest risk to the world's second-largest economy is whether it can transform its economic model to more efficient, domestic-driven growth.