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China industry on more solid ground: surveys
(Agencies)
Updated: 2009-07-01 20:10

Economists at J.P Morgan last Friday raised their projection for second-quarter gross domestic product growth in emerging Asia, forecasting quarter-on-quarter growth of more than 10 percent at an annualised rate.

That reflects assumptions that quarter-on-quarter growth in industrial output will surge at a 35 percent annualised pace -- and nearly 40 percent in China's case.

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The World Bank, the Organisation for Economic Cooperation and Development and a clutch of banks have all upgraded their growth forecasts for China in the past two weeks.

The government's goal of 8 percent GDP growth for all of 2009, once dismissed as fanciful, now looks attainable.

Andy Rothman, CLSA's China macro strategist, reaffirmed his target of 8 percent but said the risks were now clearly on the upside. "It is now safe to say that a sustainable recovery is well under way in China," he said in a note to clients.

Likewise, Mingchun Sun with Nomura in Hong Kong said the buyers' surveys suggested that the revival in manufacturing was gaining a stronger foothold and reaffirmed his forecast of 8 percent GDP growth this year and 10 percent in 2010.

Not everyone is getting carried away.

Li Hongrong, an economist with Ping An Securities in Shenzhen, cautioned that momentum in investment and industrial output could fizzle out.

"It is hard to say whether economic growth will trace a V or a W shape, but we believe a slowdown will take place next year when the effects of the government's push run out," Li said.

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