China’s economic growth will slow to anywhere between 7.5% and 8.5% this year, a marked slowdown from the 10.3% average in the past decade, according to Moody’s Investors Service. The credit rating agency said the government’s Aa3 foreign and local currency bond ratings remained the same as did its “positive” rating outlook even though the euro-zone recession was dragging on. The rating – the same as Belgium, Chile, Japan and Saudi Arabia – is based on favorable medium-term economic growth prospects and the central government’s ample fiscal headroom to manage contingent risks in the banking system, it said. Moody’s forecast on China’s gross domestic product (GDP) growth this year compares with the 8.1% to 8.6% range predicted by seven brokerages polled by the South China Morning Post. GDP in the first quarter tapered off to 8.1% year on year from an 8.9% rise in the fourth quarter of last year. Moody’s said the central government’s decision to launch a new wave of financial reforms was necessary to sustain economic growth for the rest of the decade. Recent reform initiatives included a pilot scheme to legalize private financing firms to lend money in Wenzhou; widening the U.S. dollar-yuan trading band; and tripling the quotas available for institutional investors looking to sink cash into the securities market. Credit ratings agency Fitch said U.S. manufacturers recorded slower growth in China in the first quarter.

China’s economic growth should rebound to 8.8% in 2013 despite slowing property and export sectors, the International Monetary Fund (IMF) said in its latest World Economic Outlook report. China had felt the pinch from weakening demand for its exports but was sustained by “resilient domestic demand”, the IMF said. “Investment and private consumption remained strong in China, buoyed by solid corporate profits and rising household income,” it said. Separately, HSBC forecast Chinese economic growth would accelerate to 8.3% in the second quarter from 8.1% in the first three months of the year. HSBC meanwhile said it expected interest rates to be cut by a quarter of a percentage point in the second quarter, and banks’ reserve ratio requirement before the end of June. The threat of inflation in China appears to be waning, with the producer price index dropping unexpectedly to 0% in February, a 27-month low, despite a rise in oil prices. Because of weak demand from Europe, HSBC expects export growth of 8% this year, down 11 percentage points from a year earlier. China’s GDP is forecast to grow 8.6% this year if the government eases its monetary policy, the Hongkong and Shanghai Banking Corp said, which is higher than the target of 7.5% set by the government in March. China’s economy registered an 8.1% growth in the first quarter.

The growth in China’s consumer price index (CPI) in the year to March reached 3.6%, up from February’s 3.2% and exceeding forecasts of between 3.2% and 3.4%. In the first quarter of the year the CPI grew by 3.8% year on year, the National Bureau of Statistics (NBS) said. “It’s wrong to conclude that inflation pressures increased quickly based on the higher CPI rise in March than February,” said Lu Ting, Chief China Economist with Bank of America-Merrill Lynch. Economists from JPMorgan Chase Bank said that they expected headline CPI, in year-on-year terms, to trend down again from April through to the third quarter. “Overall, the central bank should be able to achieve the full-year 4% inflation target,” the bank’s economists said in a note after the release of the NBS data. Qu Hongbin, Chief Economist with HSBC’s Asia Research Division, said the rise was almost entirely caused by a rebound in food prices, especially those for fresh vegetables, which he believed was temporary. Food prices rose 7.5% year on year, pushing up the CPI year-on-year growth for March by 2.39 percentage points, while non-food prices increased 1.8% year on year in March, the NBS noted. Fresh vegetable prices posted year-on-year growth of 20.5%, pushing up the CPI by 0.64 percentage points. Song Yu, Chief China Economist with Goldman Sachs, said the unexpected CPI figures were likely to raise concerns about a possible rebound in inflationary pressures, at least among some policymakers. Still, Song pointed out that the first negative year-on-year reading of the Producer Price Index (PPI) since November 2009 was also likely to make policymakers feel relatively comfortable with upstream inflationary pressures. The PPI fell 0.3 % from a year earlier.

China’s GDP grew by an annual rate of 8.1% in the first three months of 2012, its slowest pace in nearly three years, and down from the 8.9% growth recorded in the last quarter of 2011. It marked the fifth consecutive quarterly slowdown. However, the growth rate was still higher than the year’s target of 7.5% outlined by Premier Wen Jiabao in his government work report in March. Investment contributed 2.7 percentage points to growth, less than the 6.2 percentage points contributed by consumption, the National Bureau of Statistics (NBS) said. The World Bank cut its growth forecast for China this year to 8.2% from 8.4%. It cited United States and European economic woes and Chinese lending and investment curbs imposed to cool an overheated economy in its warning. The Asian Development Bank (ADB) has lowered its projection of China’s economic growth rate for this year to 8.5% from a previous 9.1%, citing external risks that threaten exports. It projected an 8.7% growth rate in 2013. ADB forecasts that the United States will grow 2% in 2012 and 2013, while the euro zone’s economy will shrink 0.5% this year and grow just 1% next year, and Japan’s will grow 1.9% in 2012 and 1.5% in 2013.

The development of China’s private sector is likely to witness a breakthrough in 2012. Uncertainty over external demand and slower economic growth will make the government rely more on the growth momentum generated by the private sector, said Bao Yujun, President of All-China Private Enterprise Federation. More room is available for private investment, he said at the Boao Forum in Hainan. However, China’s private enterprises face increasing pressure from price hikes in raw materials, rising labor costs, financing difficulties, and a heavy tax burden, he added. “In addition, the invisible ‘glass gate’ encountered by entrepreneurs when entering some sectors is still firmly closed. The New 36 Clauses, targeted at eliminating policy barriers in the private sector, haven’t been well-implemented in the two years,” he said. The “New 36 Clauses” were published in May 2010 to encourage and guide private investment. Premier Wen Jiabao vowed in February that detailed rules on the implementation of the “New 36 Clauses” will come out in the first half of this year. Rosa Yang, Shanghai-based Partner at Deloitte China, said that even if more specific rules are issued to allow private players to enter key areas such as railways, municipal projects, energy, finance, education, telecom and healthcare, it is difficult to say how much private enterprises would be able to benefit. Some cash-rich entrepreneurs in Zhejiang province have shown eagerness to participate in monopolized sectors such as oil exploration. Given state-owned enterprises’ long experience in their respective industries, private companies may find it hard to compete with them and may suffer losses, said Rong Guangdao, Chairman of Sinopec Shanghai Petrochemical Co, the China Daily reports.