Shado Baker
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Shado Baker in Asian Markets,

Goldman Sachs cuts China growth forecast sharply


Goldman Sachs on Wednesday slashed it outlook for China’s economic growth next year, down to 7.1% from a previous 7.6% projection.

The Goldman Sachs team cited “recently completed research on potential growth and the output gap across Asia,” adding that they saw “a likely reduction in the government’s growth target next year reducing the pressure for aggressive policy easing.”

However, they also kept their 2014 forecast at 7.3%.

China’s gross domestic product rose 7.5% in the second quarter compared to a year earlier, meeting the government’s current growth target.

Longer term, Goldman Sachs said that “in a best-reasonable-case scenario, China’s potential growth would gradually slow to just over 7% over the next five years,” with the bank predicting a slide to 6.7% GDP growth by 2017.

They also trimmed their inflation outlook, calling for “just over 2%” gains in consumer prices over the near term.

Despite the Goldman cut, Chinese markets managed to gain: About halfway through the morning session, the Shanghai Composite Index CN:SHCOMP +1.47% was up 0.2%, while in Hong Kong, the Hang Seng Index HK:HSI +0.36% inched up 0.1% in choppy trade.