China growth momentum building up: BBVA

Government fiscal and monetary measures are proving to be effective.

Inflation is also being kept in check, which provides more room for further policies to support a full growth rebound, which BBVA now expects to reach 7.8 and 8.3% in 2012 and 2013, respectively.

Here's more from BBVA:

After slowing more than expected so far this year, China’s growth is beginning to stabilize with fiscal and monetary policy support. We expect momentum to pick up gradually during the rest of the year, bringing full-year growth to 7.8% and 8.3% in 2012-13, around 0.5ppts lower than our previous projections.

With inflation remaining soft, there is room for additional policy measures to support growth. This includes further monetary policy easing, with 150bps of reductions in the RRR and up to two more interest rate cuts in 2012. Fiscal policies are also turning more growth supportive.

Currency appreciation has reversed due to the weak external environment. With exports slowing, we are scaling back our forecasts of appreciation for the rest of the year, to 6.32 per USD at end-2012, with gradual appreciation resuming in 2013.