Bank of China forecasts 7% growth rate in fourth quarter

The Chinese economy will hopefully stabilize in the fourth quarter as government policies continue to take effect, said researchers with Bank of China Ltd (BOC) on Wednesday.

They forecast that China's gross domestic product will increase by 6.8 percent in the third quarter and 7 percent in the fourth quarter of 2015. GDP growth for the whole year is expected to reach about 7 percent, down 0.3 percentage points from the previous year.

Gao Yuwei, a researcher with BOC's Institute of International Finance, said government policies to stabilize the economy will continue to show demonstrable results in the fourth quarter.

During the same period, the housing market will also recover further, for China has lowered the down payment for those who use their housing provident funds to buy a second home and eased property investment rules for foreign individuals and institutions. Real estate investment is likely to stabilize, although its growth slowed down by 9.7 percentage points year-on-year in the first eight months of this year, he said.

Zong Liang, deputy director of the institute, said the implementation of major national strategies, including plans to build a new economic belt along the Yangtze River, will set the stage for steady growth and accelerate the process of economic structure optimization.

In spite of the slowdown of Chinese economy, the real effective exchange rate of renminbi was on the rise before the People's Bank of China announced that starting from August 11, the daily fixing for the renminbi against the US dollar will reference the previous day's market closing rate as well as the daily foreign exchange demand and supply.

This move of the PBOC makes the daily fixing more reflective of changes in economic fundamentals, said Zhong Hong, executive senior economist with the institute. She expects to see two-way fluctuation of the real effective exchange rate of renminbi and the exchange rate of renminbi against the US dollar around the newly established equilibrium level at the end of this year.