Use capital wisely to boost growth, Beijing told
Slowing mainland economy's problem is not lack of liquidity, but inefficient use of it, analysts say
The latest batch of mainland economic data has triggered a slew of cuts to analysts' forecasts for domestic growth this year, but officials are unlikely to loosen monetary policy in response.
Beijing's problem instead is how to channel already abundant financial system liquidity more efficiently, not create more of it, analysts say - despite data for May that dashed hopes of a strengthening economic rebound in the second quarter.
Export growth fell sharply to 1 per cent year on year last month, while industrial production in the first five months of the year saw the weakest growth since 2009 and new yuan lending in the month also dropped 14.5 per cent to 667.4 billion yuan (HK$844.6 billion) from a year ago.
All figures lagged behind market estimates.
Economists at UBS cut their 2013 growth forecast to 7.5 per cent from 7.7 per cent and RBS also cut its to 7.5 per cent. Nomura's chief China economist Zhang Zhiwei said the data put a downside risk on his 7.5 per cent call, despite it already being near the bottom of the consensus range.
Beijing set a growth target of 7.5 per cent for this year, a level many analysts believe to be the minimum level acceptable to the government.
Premier Li Keqiang said on Saturday that growth remained relatively high and reasonable. He added that the government would support growth through "activating" existing credit.
