Goldman Just Cranked Up Its Growth Forecast For China

Goldman Sachs's Li Cui and her team revised their Q4 2012 Chinese GDP growth forecast to 7.8 percent year-over-year, up from 7.6 percent.

The revision in fourth quarter data is based on better than expected "production-side data" namely better fixed asset investment and industrial production data.

Goldman analysts also revised their 2013 GDP forecast to 8.2 percent, up marginally from 8.1 percent.

"This is entirely the result of our 4Q2012 growth adjustment, which puts 2013 on a higher base. We carry forward our cautious view of the gradual demand recovery and keep our sequential growth forecast unchanged from before.

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, in our baseline forecast, momentum in the next few months would be weaker than in October and November, as exports are affected negatively by the possible headwinds from the fiscal adjustment in the US and Europe in the early part of next year. We expect a more sustained demand pickup after 1Q2013, as global growth is put on a stronger footing."

Despite comments from the Central Economic Work Conference that showed that policymakers are willing to use policy to bolster the economy through infrastructure spending, Goldman like other street analysts has warned that policy support will be "measured".

Here's a chart from Goldman that shows that China's GDP growth trajectory and where it is projected to go in 2013:

Goldman points out in a separate note that the current recovery has been led by infrastructure spending which "tends to imply leverage acceleration, which in a modest pace is likely to be tolerated." This chart shows the recent pick up in leverage:

*SEE ALSO: The Ultimate Guide To China's Voracious Energy Use ext