Chinese Growth Outlook Cut by UBS

Citing a weakening global economic environment and the possibility of central bank intervention, UBS UBS reduced its 2011 and 2012 growth projections for China Thursday. In 2011, UBS forecasts growth of 9% versus 9.3% previously. In 2012, UBS is forecasting growth of 8.3%, falling short of its previous 9% projection. While the forecast reduction isn't especially dramatic in nature, it's not often that investment banks or ratings agencies cut growth projections for the rapidly-expanding China. "This downward revision reflects much weaker growth prospects in developed economies," Tao Wang, UBS' China economist, said in the report. "A significant drop in export growth, which could start in the fourth-quarter of 2011, is also expected to affect manufacturing investment and consumption," Wang continued. For the time being, it's expected that The People's Bank of China - the country's central bank - will keep interest rates steady. Action could be provoked if investment or growth drops considerably. Additionally, China is heavily dependent on exports to foreign countries, so it has already felt a hit from its trading partners. It's unknown how the country will act in the coming 18 months, according to Wang. "If real economic activity such as exports, production, and investment has faltered by then, we think the government could start to ease policy as early as end 2011," he noted.