China reverts to GDP range forecasting
February 4, 2016, 5:10 am

By using a range forecast, China’s leadership hopes markets will have more room and time to adjust to global changes [Xinhua]

National Development and Reform Commission (NDRC) head Xu Shaoshi told reporters late Wednesday that China is targeting a 2016 growth rate range of 6.5 to 7 per cent.

In early 2015, it had forecast a 7-per cent growth rate, later revised to 6.9 per cent – its lowest in nearly 25 years.

The last time the Chinese leadership forecast a growth range was in 1995 – eight to nine per cent at the time.

Chinese markets reacted favorably to the growth range.

Hong Kong’s Hang Seng Index (HSI) opened 1.49 per cent higher at 19,274.

The benchmark Shanghai Composite (SHCOMP) also opened up 1.06 per cent at press time to 2,768.

Other Asian indices were also up: South Korea’s Kospi was up 1.28 per cent, while India’s Sensex was up 0.58 per cent.

Japan’s Nikkei opened 0.12 per cent in the red, but it was Australia’s ASX that continued a three-day slump heading down 0.30 per cent at press time on low commodity and energy prices.

Oil prices have regained ground in the past two days to above $35 for Brent Crude and above $32 for West Texas intermediate but there are global market fears of a slowdown in the Eurozone and slower than predicted recovery in the US.

China output

But China’s economic forecast comes on the heels of a report showing that manufacturing activity contracted for the sixth straight month in January, signalling persistent weakness.

The purchasing managers’ index (PMI) came in at 49.4, down from December’s 49.7, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while a reading below 50 reflects contraction.

The index, below the market forecast of 49.6, fell to its lowest level since August 2012, as China’s economy is seeking new growth engines amid a housing market slowdown and a campaign to cut industrial overcapacity.

But Chinese indices have rallied for three consecutive sessions also partly due to the central bank continuing to pump money into the financial system on Tuesday through open market operations to offset a pre-holiday cash crunch next week.

The SHCOMP and HSI were also buoyed by a report from Caixin Media’s financial information service provider Marki, which indicated that the purchasing managers’ index (PMI) for services rose to 52.4 in January, up from a 17-month low of 50.2 in December.

The BRICS Post with inputs from Agencies