Recovery gains momentum, growth forecast raised

Goldman Sachs, JPMorgan Chase, Fidelity International, Deutsche Bank and some other foreign financial and banking institutions have raised their growth forecast for the Chinese economy, saying the Chinese stock market has bottomed out.

Their optimistic view of China's economic prospects is mainly based on the continuous countercyclical adjustments, and the fact that the economy has stabilized, which means the economy will further rebound in the fourth quarter of this year.

Yet some US politicians are betting against the Chinese economy, trying to project that the United States enjoys an advantage over China in terms of economic prospects. It is because of these reasons that China's economic risks and problems appear more threatening than they actually are. At the end of July, the central authorities announced that measures will be taken to expand domestic demand, boost investor and consumer confidence, and prevent risks, especially by adjusting the real estate policies and defusing local debt risks. Subsequently, government departments at various levels issued a series of policies to help the property market recover.

China's economic data has continued to improve since August, with the economy gradually bottoming out. Also, now that the issuance of special bonds by local governments will accelerate, we can expect local governments to expedite infrastructure construction and strengthen their countercyclical adjustment capacity.

The continuous improvement of the economy and minimizing of local debt risks will add momentum to the property and capital markets' recovery. All these have prompted foreign financial institutions and rating agencies to raise their growth forecast for China.

Besides, the changes in the external environment are conducive to the recovery of China's stock market. US economic data suggest the Federal Reserve will raise the interest rate at least one more time this year and might maintain it for a longer period of time, thereby increasing the risk of recession in the US and reducing the capital market's appetite for taking risks. And the increase in the interest rates of the Japanese government's bonds may force Tokyo to adjust its yield-curve control policy, making yen funding more expensive.

This could force global investors to reallocate their assets. And China is the only major economy that is not at risk of inflation now. The likelihood of renewed inflow of foreign capital is therefore high, especially in new infrastructure, renewable energy, electronic vehicles and mass consumption sectors.

- 21ST CENTURY BUSINESS HERALD