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JP Morgan revises GDP growth forecast

By Hu Yuanyuan  (

16:11, May 15, 2013

JP Morgan cut its forecast for China's 2013 GDP growth to 7.6 percent, due to soft April economic data, it said in an e-mail statement on Wednesday.

"The April data suggests that domestic demand remains on the weak side, and by extension has also caused softening in the service sector," said Zhu Haibin, economist with JP Morgan.

Despite strong growth in real estate and railway investment, manufacturing investment continued to slow and the recovery in industry production is weaker than expected.

Meantime, inventories built up quickly in major industries ,such as steel, machinery and automobiles, suggesting that the economy may face another round of de-stocking pressure in the coming quarters, according to the research note.

The divergence between rapid growth in social financing and the weak economy continued to exist, and the impact of credit growth on economic growth may be longer than expected.

It is likely that some liquidity has been simply flowing between the banking system and shadow banking, leading to a high growth in aggregate financing but without supporting economic activities.

There is no indication that policy stance will be shifted quickly to support near term growth, the note showed.

"Therefore, we revise down the GDP forecast in 2013 to 7.6 percent from the previous forecast of 7.8 percent. By quarters, we trim down the sequential growth in the next three quarters to 7.4 percent, 7.8 percent and 7.8 percent quarter-on-quarter respectively while our previous forecast is 8.2 percent, 8 percent, 8 percent. Correspondingly, growth rates in year-on-year terms in the next three quarters will be 7.8 percent, 7.7 percent and 7.4 percent respectively."

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