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China to grow by 7-7.5% this year
30 January 2014
State Street Global Advisors estimate broadly in line with consensus
State Street Global Advisors
State Street Global Advisors Investment Solutions Group
strategist George Hoguet has expressed confidence that
China’s economy will grow by between 7% and 7.5%
in 2014 despite potential problems in its financial markets and
shadow banking system.
In its most recent World Economic Outlook (October 2013),
the IMF forecasted the Chinese economy will grow 7.3% in 2014.
However, Hoguet observed that global investors are increasingly
worried about the state of the Chinese financial markets and in
particular, the shadow banking system.
"Also of concern is the pace of the implementation of the
recently announced goals of the Third Party Plenum and the
implications of the gradual liberalisation of interest rates
for corporate solvency and financial stability. The recent
spike in Shanghai Interbank Offered Rate (SHIBOR), while not as
pronounced as the interest rate surge of July 2013, is a
reminder of the potential for a liquidity squeeze."
Hoguet expects Chinese interest rates to rise in 2014 and said
this development may increase financial market volatility.
"Global investors should pay close attention to the policy
actions of the People’s Bank of China (PBOC) and
the speed with which reforms are implemented. Risks to economic
activity in China in 2014 are to the downside, but there is
insufficient evidence as of the start of 2014 to suggest that
consensus is widely off the mark."