Lingering euro-zone crisis expected to hinder China's economic recovery
Standard Chartered sees U-shaped rebound on the mainland as crisis in the euro zone lingers
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.
