China Will Grow 8.6% in 2012 – HSBC

China will continue to enjoy more than average economic growth of 8.6 per cent in 2012, the Hongkong and Shanghai Banking Corp. forecast in its annual global research released Thursday.

Even though exports and home sales are projected to continue sliding next year, HSBC economists forecast China's GDP growth rate will reach 8.6 per cent in 2012 and 8.8 per cent in 2013.

Although the latest projected numbers show a reduction from 8.9 per cent in 2011 and 10.4 per cent in 2010, these remained far above the world average growth expected for 2012 and 2013, which are 1.9 per cent and 2. 6 per cent, respectively, HSBC economists noted.

HSBC sees China taking steps to relax its fiscal and monetary policies next year to cushion an expected growth slowdown in 2012. The modifications, along with continued investments in existing projects, will help China keep its GDP growth above 8 per cent in the coming years.

HSBC's projection is almost parallel to that of the World Bank. In November, the World Bank said the world's second-largest economy will grow 9.1 per cent in 2011, followed by a slower 8.4 per cent growth in 2012.

The World Bank also said the whole of East Asia is expected to grow in 2012 by 7.8 per cent, down from 8.2 per cent in 2011.

China's manufacturing has been forecast to contract for a second month in December. A preliminary reading of HSBC Holdings PLC's China purchasing managers' index showed the activities in the country's mainland's factories will reach 49.0 in December. This is below the threshold of 50, the point of contraction and expansion. November's official number was 49.

China also expects exports to slowdown next year. In October, although exports increased 15.9 per cent to $157.49 billion compared a year ago, it was the lowest growth rate seen for exports in five months.