Major Chinese bank cuts forecast for China's Q2 growth

By Kim Young-gyo
HONG KONG, June 3 (Yonhap) -- A major Chinese bank on Friday revised down its forecast of the country's economic growth for the second quarter of this year, citing slowing production in the world's second-largest economy.
Shanghai-based Bank of Communications predicted that the Chinese economy will grow 9.5 percent during the April-June period, compared with its earlier projection of 10 percent.
"From the second quarter of this year, the power supply started to affect industrial production, while agricultural production could be devastated due to a severe drought in the Yangtze River area," said Lian Ping, chief economist for Bank of Communications. "In the short term, these factors will pull down the economy."
China's electricity shortage and a prolonged drought are feared to exert downward pressure on the growth of the Chinese economy.
The country is expected to face its worst electricity shortage in seven years largely due to soaring coal prices, while central China, along the Yangtze River, was severely hit by a drought that lasted about 200 days.
The economist, however, said a sharp decline in the economic growth is unlikely.
"Domestic consumption will continue to grow steadily through the second half of 2011, especially in affordable housing and automobiles," Lian said.
In the first quarter of 2011, China's economy grew 9.7 percent on-year, slightly down from the 9.8 percent expansion during the same quarter a year earlier. Last year, the Chinese economy expanded 10.3 percent. Beijing is seeking to contain its economic growth in the 8 percent range this year.
Last month, Goldman Sachs lowered its forecast for China's economic growth of this year. China's economy will likely expand 9.4 percent from a year earlier in 2011 and 9.2 percent in 2012, down from previous estimates of 10 percent and 9.5 percent, respectively, it said.
ygkim@yna.co.kr