Soft or hard landing? None. Nomura’s Chief China Economist Zhiwei Zhang offers some very bullish thoughts on the world’s second-largest economy.
Market sentiment for China’s growth outlook has been overwhelmingly negative as the Shanghai stock market index hit a post-2009 low. However, Zhang disagrees with the consensus view and believes that “economic growth in China will rebound earlier, and stronger, than the market currently expects.”
Here is an excerpt from Nomura’s note:
“We believe economic growth in China will rebound earlier, and stronger, than the market currently expects. The consensus forecast for 2012 GDP has fallen to 7.7% from 8.1% three months ago, and on a quarterly basis the consensus expects growth to slow from 7.6% y-o-y in Q2 to 7.5% in Q3, before recovering slightly to 7.7% in Q4. We on the other hand expect growth to rebound visibly in Q4 2012 to 8.8%, driven by stronger infrastructure investment and a rebound in housing investment, which combined account for half of total investment.
We believe CPI inflation bottomed in July and will rise to 3.1% in Q4 2012. We expect CPI to climb further to 4.2% in 2013, exceeding the consensus forecast of 3.4%. We believe the economic recovery will open up a positive output gap. The surge in global food prices is also likely to push up pork and edible oil prices in China.”