BBVA lowers growth projection for China at bottom line of 7% for 2014

HONG KONG – BBVA researchers have lowered their growth projections for China following comments by Premier Li Kequiang, but are maintaining 7% as a bottom. BBVA says Li’s commitment to sustain the economy in 2014 within a “reasonable zone” is being interpreted by market analysts as a combination of two limits: an upper bound of 3.5% for inflation, and a bottom line of 7.0% GDP growth.

China’s growth momentum has moderated since Q3 last year, and activity indicators for January and February have suggested that the economy might decelerate further. However, Premier Li has conveyed the message that the Government will react with more growth supportive measures if needed.

“Looking ahead, we aim at a moderate downward revision of our 2014 growth projection for China based on the smoothening effect of Li Keqiang’s words of potential pre-emptive action on the background of quite gloomy data,” BBVA says. “As such, we expect growth momentum to stabilise in the second quarter, after a small dip in the first quarter.”