HSBC cuts China GDP outlook to below 5pc

HSBC (0005) has lowered its growth forecast for China's gross domestic product for this year from 5.3 percent to 4.9 percent, slightly below market expectations.

The bank also cut its China GDP growth forecast for next year from 4.9 percent to 4.6 percent, and anticipated that China's monetary policy stance will become more accommodative next year with policy interest rates and the reserve requirement ratio expected to be reduced by 0.2 and 0.5 percentage points respectively.

The report said that as China shifts its focus from investment-driven growth to a high-quality and sustainable growth model, the country is preparing for structural economic reforms to address long-standing challenges including local government debt burdens.

HSBC has mentioned that a comprehensive plan is presently being developed by the government, which may encompass a range of measures to address immediate liquidity needs while also resolving issues related to the misalignment of basic costs and benefits.

While a temporary slowdown in expansion speed may be observed in the short term, HSBC believes that these steps are necessary to unleash future growth potential.

It is anticipated that the guiding principles for the next round of economic reforms in China will be announced at a significant political conference later this year.

These principles are expected to place greater emphasis on supporting consumption-driven growth, fostering manufacturing upgrades and promoting green development as new drivers of economic growth.

Meanwhile, the onshore yuan closed below 7.31 against the US dollar compared with 7.30 last Friday.

Traders noted that the US dollar remains relatively strong and the yuan is expected to remain under pressure this week unless regulators take further steps to stabilize it.

Hong Kong has actively expanded the variety of yuan products in recent years. Joseph Chan Ho-lim, the Under Secretary for Financial Services and the Treasury, has stated that the Hong Kong government and regulatory authorities will continue to work with relevant mainland departments to gradually promote the expansion and enhancement of various cross-border connectivity schemes.

Among these initiatives are probable introduction of sovereign bond futures in Hong Kong, over which discussions have already begun.