BEIJING (Reuters) - China’s economy has weathered the worst after reporting its slowest quarterly growth since the tail-end of the great financial crisis in the first three months of 2012, and is heading for a rebound in coming months, a Reuters poll showed.
Economists expect the world’s second-biggest economy to grow 8.4 percent this year, unchanged from their forecast in the last poll in January, and expect growth to steadily tick higher in subsequent quarters to reach 8.7 percent by April-June 2013.
All 30 economists expect China to at least meet and probably exceed the government’s target growth rate of 7.5 percent this year, with only four predicting a growth rate below 8 percent.
“Our forecast of 8 percent growth this year remains realistic. Even if growth is slightly lower than that, a hard landing is a distant prospect,” said Dariusz Kowalczyk, a senior economist at Credit Agricole.
“Worries among international investors appear unjustified, as it would be easy for the government to re-accelerate growth if it chose to do so,” he added.
Price pressures are expected to remain under control. The median forecast for inflation this year was 3.4 percent, comfortably below Beijing’s 4 percent target and unchanged from January.
That gives the People’s Bank of China (PBOC) room to cut the reserve requirement ratio for banks by 50 basis points in each of the last three quarters of 2012, the poll showed.
That would leave the ratio at 19 percent -year and to 18 percent by the second quarter of 2013.
Easier credit is expected to support the economy, at a time when exports are reeling from Europe’s debt problems and a still-patchy recovery in the U.S. economy, In March, exports grew just 8.9 percent from nearly 20 percent in 2010.
Beijing has pledged to bring its current account into balance as it refocuses the economy more towards domestic consumption and away from volatile foreign demand for manufactured goods.
For the first quarter as a whole, total exports were valued at $430.02 billion, while imports were $429.35 billion - bringing the trade account roughly into the balance targeted by the government.
Last week, China also took a milestone step in turning the yuan into a global currency on Saturday by doubling the size of its trading band against the dollar, pushing through a crucial reform to further liberalize its nascent financial markets.
Cooling factory output and slowing exports dragged China’s economy into its slowest growth in nearly three years in the first quarter of just 8.1 percent, feeding speculation that China could act more forcefully to foster growth.
But most analysts say that is not likely. Instead, they expect policy to be eased gradually to target small firms that suffered the most under the strident tightening of 2010 and 2011.
Beijing’s intent to loosen credit conditions to aid economic growth was underscored by local media reports on Wednesday that cited the central bank as saying more open market operations and lower reserve requirements are in store.
“This is a clear ‘open mouth operation’ through which the People’s Bank of China sent the market a signal that further loosening measures will be rolled out,” Zhang Zhiwei, an economist at Nomura said in a note.
“Monetary and fiscal loosening in the second quarter will likely stimulate growth in the second-half to above potential growth.”
Editing by Ramya Venugopal