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Chinese government lowers growth forecast for year

Julia Coronado Mar 5, 2012

Jeremy Hobson: In China today, the government lowered the country’s growth forecast for the year to 7.5 percent. That’s the first target under 8 percent since 2005.

And that’s where we’ll start now with Julia Coronado, chief economist with the investment bank BNP Paribas. She’s with us live, always, from New York. Good morning.

Julia Coronado: Good morning.

Hobson: So why was this target lowered and why does it matter?

Coronado: China’s going through a political transition right now to new leaders and they’re trying to keep people happy. And in particular, inflation has been a big problem in China. Food inflation has hurt Chinese consumers and they want to, by targeting lower growth, they want to keep that inflation in check and keep people happy during this transition period.

Hobson: And one of the things that the Chinese government wants to do is reduce China’s reliance on exports. What does that mean for us over here?

Coronado: Well, that’s actually good news for the U.S. One of the things that has weighed on U.S. growth is that we’ve been importing more stuff from China and exporting less. This has really eroded our manufacturing base over the last three decades. We all want to turn that around — so, the stronger China is, the more we can export to them instead of the other way around and that will help our manufacturing sector gain footing.

Hobson: And just to be clear Julia, 7.5 percent growth in China is actually low, even though here it would be quite high.

Coronado: Exactly. Wouldn’t we love to see 7.5 percent growth. But for them, it is down from more like 9 to 10 [percent].

Hobson: All relative. Julia Coronado, chief economist with the investment bank BNP Paribas. Thanks as always.

Coronado: It’s a pleasure.

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