“A string of weak economic data has brought back talks of a Chinese hard landing.
But in a new note to clients Ting Lu, China economist for Bank of America-Merrill Lynch says “China might be bottoming out from the unlucky Jan-Feb”.
Lu the #1 China economist according to Bloomberg says in the first two months, the Chinese economy was hit by weaker external demand, its coldest winter in 27 years, political tensions that distracted from the economy, and destocking by manufacturers following declining home sales in the last quarter of 2011. But he thinks the worst may bet over:
“The inevitable fight for political succession was finished ahead of schedule. The situation is turned for the better, and the leadership change will be even smoother, we believe. Top leaders, both outgoing and incoming, will refocus on delivering stable growth. Winter is gone finally; banks are cutting their exorbitant lending rates; new home sales rebounded as mortgage rates for first home buyers were slashed; daily steel output reached new record high as destocking is close to its end. Last but not the least, with the 2nd round LTRO, at least there is no imminent risk of another global financial crisis, in our view.”
While others like Morgan Stanley’s Joachim Fels have revised up their GDP forecasts to 9 percent for 2012, Lu maintains his annual forecast for 8.6 percent because he doesn’t expect Beijing to “overly stimulate the economy”. He argues that China already is a major consumer of big commodities and faster growth will only raise the costs of raw material imports and consequently inflation.
Going forward Lu sees some positive data coming out of China….”
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