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China's economy likely to rebound in Q2 - Merrill Lynch

(Xinhua)
Updated: 2009-01-29 10:48

China's economy may start to rebound in the second quarter of the year as an increase in domestic demand outpaces the fall in exports, Merrill Lynch said in a recent research report.

Special Coverage: Coping with Financial Crisis Related readings:  China's CPI rises 5.9% in 2008  GDP growth slows to 6.8% in Q4 of 2008  Fixed assets may prop up economy  China's retail sales to remain robust in '09

The economy slowed sharply in the second half of 2008 because of weaker demands for Chinese goods from the US and Europe and a slower investment growth in domestic property sector.

The GD) grew 6.8 percent in the fourth quarter from a year earlier, compared to 9 percent in the third quarter and 13 percent in 2007. This dragged down the annual growth rate for 2008 to a seven-year-low of 9 percent.

The economic growth is likely to bottom out between the fourth quarter of 2008 and the first quarter of 2009, the US bank said.

In the first quarter, export growth could fall further, but domestic demand is likely to gain some momentum, it said, adding that the two forces will offset each other and lead to a GDP growth similar to the fourth quarter.

"After that, rise in domestic demand will likely outpace the fall in external demand, and we expect growth to pick up from the second quarter and we are quite confident about an 8 percent GDP growth in 2009," the bank said.

Merrill Lynch said almost all major monthly indicators, including industrial production, power output and retail sales, point to a recovery.

Industrial production growth for December rebounded to 5.7 percent year-on-year from 5.4 percent in November. In addition, electricity production was down 7.9 percent, an improvement from the 9.6 percent slump in November.