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Real Time Insight

Recent domestic economic data has failed to provide any clarity on the direction of the US economy or the monetary policy and the market participants are now hoping that China’s Q1 GDP, scheduled to be released tomorrow would provide some answers about what is happening in the world’s second largest economy.

There are some “whispers” in the market about the number being higher-than-expected; the whisper number being around 9.0% versus consensus estimate of about 8.4%. 

This morning, the World Bank cut its growth forecast for China to 8.2% from its earlier forecast of 8.4% for 2012, citing U.S. and European economic problems and Chinese lending and investment curbs imposed to cool an overheated economy.

The Asian Development Bank came out with a stronger expectation yesterday- 8.5% in 2012, on the back of strong investment and rising private consumption.

The Chinese Premier Wen, on the other hand has stated said that GDP may only grow by 7.5% in 2012.

While there is no doubt that China has been slowing, the question is whether it can avoid a hard-landing.

Also, while there is always a big question on the reliability of official Chinese data, the market is usually pretty sensitive to the Chinese GDP data and if the numbers come in below expectation tomorrow, the market may sell off.

Some of the recent numbers have been contradictory and confusing. For example, the official PMI showed expansion but the HSBC PMI for March showed significant contraction. More recently, the narrow trade surplus for March surprised everyone, as the exports grew much faster than expected.

What is your expectation about the Chinese GDP? Will it provide a direction to the market tomorrow?

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