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Deutsche Bank ups China GDP forecast to 10.7%

(Reuters)
Updated: 2007-06-22 15:00

Deutsche Bank has raised its forecast for China's economic growth in 2007 to 10.7 percent from 10.0 percent, as a growing list of investment banks revise their outlook after strong activity in the first five months of the year.

China economist Jun Ma said in a research note that Deutsche had upgraded itsgross domestic productgrowth forecast because of accelerating expansion of fixed-asset investment (FAI) and factory output.

Related readings:  Morgan Stanley raises GDP forecasts for China  WB raises China growth forecast to 10.4%  Four factors bolster China's economic growth  Fixed-asset investment up 25.9%

The bank has accordingly revised its forecast for investment growth this year to 24 percent from 21 percent. The forecast for industrial production (IP) was increased to 16.7 percent from 15.3 percent.

Ma said that quicker investment and production growth would be sustainable over the coming quarters because high profits were giving firms an incentive to invest and because there was plenty of non-bank financing available to them.

"We believe that theGDP, FAI and IP growth remain within the government's tolerance range and will unlikely trigger harsher administrative measures to significantly slow down investment growth," he added.

Deutsche's revision follows a similar move this week by Morgan Stanley, which upped its 2007 GDP growth forecast to 10.5 percent from 9.3 percent. Earlier this month, HSBC increased its forecast to 10.6 percent from 10.0 percent.