World Bank lowers Chinese economic growth outlook for 2014

The World Bank has lowered its forecast for China's economic growth this year to 7.6% from 7.7% taking into account soft data on industrial output and exports in the first two months of the year. The multilateral organization said that it has maintained its 2015 forecast at 7.5%.

The bank said that while the growth rate of industrial production has slowed, and exports contracted in the first two months of 2014, the trend is nevertheless strengthening, and we expect quarterly growth to rise at midyear as external demand from the high-income countries solidifies.

Some analysts have said that the Chinese economy probably began to rebound in March, although Q1 growth may fall though the government's bottom line of about 7.5%. These analysts estimated Q1 GDP growth at 7.2% to 7.4%.

The Australia and New Zealand Banking Group Limited said that but the economy is on the mend and that will be evident in the Q2 figures, which will get a lift from the government's fine tuning.

The State Council, the country's cabinet, announced pro growth measures on April 2, including railway investment, urban renovation programs and tax breaks for small businesses.

Analysts said that those steps indicate the government aims to avoid a sharp slowdown and stabilize near term growth. Power generation, rail cargo volumes and crude oil processing activity in March all showed signs of improvement. Surveys also found rising business confidence.

According to the National Development and Reform Commission, from March 1 to 24, electricity output increased 8.4% YoY compared with 5.5% growth in the first two months.

Further evidence of an economic rebound came in stronger export data, in the form of higher orders in the official and HSBC Holdings Plc manufacturing Purchasing Managers' Indexes for the first two months.

Now economists are looking to the next round of statistics. The National Bureau of Statistics is scheduled to release figures on consumer and producer prices on Friday.

Mr Wang Tao chief economist in China at UBS AG said that "We expect the upcoming March data to show a modest sequential recovery of economic activity, which may only partly offset particularly weak start in January and February. The bank has estimated that GDP growth in the first quarter probably softened to 7.4% from 7.7% in the Q4 last year.”

Mr Wang said that "Looking ahead, we expect growth momentum to rebound more visibly in the second quarter, on the back of reduced policy uncertainties after the annual session of the National People's Congress in March, an acceleration of ongoing construction and investment and the launch of new projects already approved in the government's budget and economic agenda."