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China May Introduce Stimulus If Economy Slows, HSBC’s King Says

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HSBC Holdings Plc’s Chief Economist Stephen King
Stephen King, chief economist at HSBC Holdings Group Plc. Photographer: Kerem Uzel/Bloomberg

Nov. 2 (Bloomberg) -- Slowing economic growth in China could prompt authorities to introduce policy stimulus, Stephen King, HSBC Holdings Plc’s chief economist, said yesterday.

“China won’t want to see anything below, say, 7 percent,” King said in an interview in Beijing. If growth slows to that level, the government may introduce policies to bolster the economy, King said.

Fifty-nine percent of global investors in a Bloomberg poll published in September predicted economic growth in China will slow to less than 5 percent by 2016. Growth moderated to 9.1 percent in the third quarter, the slowest in two years, after the central bank limited lending to fight inflation and the European debt crisis eroded demand for exports.

“There’s always been a fear that something must be going wrong in China” because it’s achieved a growth that’s “without precedent” during the past three decades, King said. “I think the 5 percent forecast is far too pessimistic.”

Data yesterday showed a Chinese manufacturing index dropped in October to the lowest level since February 2009 as a measure of export orders contracted for the second time in three months.

King said the tightening steps adopted by China are working, with slowed credit growth and moderated domestic manufacturing evidence of its effect. China’s money supply grew 13 percent in September, the slowest pace in a decade, after the central bank raised borrowing costs five times and boosted lenders’ reserve requirements nine times in the past year to curb inflation.

“We are close to an inflection point now,” King said, adding that the need for further tightening “is gone.”

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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