Growth to recover in second quarter: Report

Updated: 2012-05-15 21:35

By Hu Yuanyuan(

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China's economic growth will recover from the second quarter, due to the rebound in export, property sales and stronger fiscal spending, Deutsche Bank AG said in a research note on Tuesday.

China's export orders continue to rise, the report said. Both the new export orders indices in the official PMI report and the HSBC PMI report rose in April, for the third consecutive month.

"Given that export orders typically lead actual delivery by two months, it implies that quarter-on-quarter recovery of export growth is taking place," said Ma Jun, chief China economist of Deutsche Bank.

Property sales have sustained their recovered level since early March.

"Although there is still uncertainty on its sustainability, we believe the improvement in property sales will gradually lift developers' sentiment and help reduce the downside risk of a sharp investment slowdown in the real estate sector," said Ma.

According to Ma, a key reason for the recent recovery of property sales is that affordability has improved significantly due to rapid income growth and a modest price decline in the property market.

Over the past 18 months, average property prices fell by a few percent, but average urban income rose by 20 percent. This resulted in a sharp decline in the price to income ratio in 39 major cities, the bank's research showed.

Thirdly, fiscal spending, bond financing and project implementation have accelerated.

"We marginally revised down our 2012 GDP growth forecast by 0.1 percentage point to 8.5 percent on a technical change in the seasonal adjustment method," said Ma.