Goldman Sachs Group Inc. cut its growth forecast for China this year to 10.1 percent from 11.4 percent as government restrictions on lending and real estate slow expansion in the world’s fastest-growing major economy.
The yuan strengthened for a ninth day, breaching 6.7 per dollar for the first time since 1993, after President Barack Obama criticized China for using an undervalued currency to gain an unfair trade advantage.
China’s yuan forwards dropped most in 22 months on speculation the government will rely more heavily on interest-rate hikes to damp inflation, curbing the need for currency gains to reduce import costs.
China’s home prices will decline from this month as the government maintains its lending curbs and increases the supply of public housing, forcing property developers to cut prices to boost sales, BNP Paribas said.
China may ease tightening measures as the deepening European crisis threatens global growth, AMP Capital Investors and BNP Paribas said, while BofA Merrill Lynch Global Research predicted a delay in the yuan’s revaluation.
China’s stocks gained, reversing earlier losses, as investors speculated the government may hold off from raising interest rates as a slower U.S. recovery and Europe’s debt crisis threaten economic growth.
Chinese policy makers will boost benchmark interest rates four times in the next 12 months, more than most of the world’s biggest economies, as they tackle the fastest inflation in two years, trading in swaps shows.