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Morgan Stanley's Asia/Pacific economics team recently lowered their 2012 economic outlook for China. The team led by Helen Qiao is now forecasting 8.4% GDP growth in 2012, down from a previous estimate of 8.7%. This is also a deceleration from an estimated 9% growth in 2011.
We trim our GDP growth forecast to 8.4% in 2012 to reflect: i) deterioration in the external environment, ii) weakness in the domestic housing market, and iii) constraint in policy easing vs. three years ago.
Regarding the external environment, Morgan Stanley's Global Economics team its 2012 global GDP forecast to 3.5% from 3.8% blaming weakness in the euro area.
Morgan Stanley's base case scenario for China assumes a regulatory environment that favors small and medium-sized enterprises (SMEs), public housing, and emerging industries. The analysts also believe Chinese policy makers will have the ability to avoid any hard landing scenarios. As such, there bear case scenario assumes GDP growth of no less than 7.7% in 2012.
The full report provides a detailed break-down of base, bear, and bull case scenarios for China area economy.
Growth is expected to pick up in 2013 driven by domestic demand
