The euro-zone crisis will last longer than expected and slow the mainland's economic recovery, Standard Chartered economists predict.
Although Standard Chartered improved its outlook for the euro zone's gross domestic product from a 0.8 per cent decline to 0.6 per cent this year, it lowered its forecast for next year to 0.4 per cent growth from 0.6 per cent.
"The recession [in the euro zone] is set to worsen in the second half. We expect quarter-on-quarter growth to return only in the first quarter of 2013 and remain well below its historical trend throughout next year," the bank said.
Standard Chartered senior foreign exchange strategist Robert Minikin said it was "a longer recession than we expected and this was extremely significant for Asia and China".
"This is going to be negative for the global economy all the way through 2013," he said, adding that mainland and Hong Kong exporters would suffer from the crisis and the yuan would appreciate slowly.
The European crisis affected Hong Kong and the mainland chiefly through trade, said the bank's senior economist Kelvin Lau. "The external headwinds that China faces in the next 18 months will be significant and China's recovery will be U-shaped, not V-shaped," he said, referring to a slow recovery.
For the rest of this year, Lau expects one more interest rate cut by Beijing and increased infrastructure investment.
The Ministry of Industry and Information Technology said yesterday on its website that the nation's industrial output would rise 10 per cent this year, less than the previous target of 11 per cent and slower than the 13.9 per cent growth in 2011 and 15.7 per cent growth in 2010.
Although industrial output rose 10.3 per cent in the first seven months this year, the year-on-year growth was less than the 10 per cent recorded in April, May, June and July, the ministry said.
Meanwhile, the HSBC China manufacturing purchasing managers' index (PMI) for August indicated new business in China fell at the sharpest rate in the past nine months. The PMI was 47.6, down from 49.3 in July, signalling a 10th successive month-on-month decline in the manufacturing sector.