MacQ China GDP forecast upped

China GDP forecast upped!
In today's lead item, our China economist Paul Cavey raises our 2009 GDP forecast by 1ppt to 7.5%-8.0%, reflecting remarkable recent strength in bank lending and fixed asset investment (FAI), which grew 26.5% YoY in Jan-Feb.

At over 40% of GDP, investment as an engine of growth should be exhausted. Apparently though it is in rude health. Fixed asset investment (FAI) grew 26.5% YoY in Jan-Feb 2009, above both the 2008 rates and our 2009 forecast of 15%. In any case, the awkward reality is that official economic data matter for recorded GDP, and so far most of it has been better than expected. We thus raise our 2009 forecast FAI growth to 18%, lifting GDP growth from 6.5–7.0% to 7.5–8.0%. This is a step closer to the magic 8.0%, but at a cost: on our numbers investment would hit an all-time high of 42% of GDP by end-09. The highpoint of this month's data releases will obviously be 1Q09 GDP, scheduled to be announced on16 April. With the strength in FAI, this is set to be higher than we first thought, so we raise our guesstimate from 6.4% to 7.2%.