China: 2009 GDP Forecast Upgrade — 5.5% to 7.0%

On less-bad-than-expected numbers and general happiness with policy responses there, China gets a material GDP growth forecast upgrade from Morgan Stanley. The number goes from 5.5% to 7.0% on the year:

…it appears that a rosy ‘goldilocks recovery scenario’, which we had previously thought of as a low probability event, is playing out. Specifically, we had envisaged that, under this ideal recovery scenario, the Chinese authorities’ policy responses would help to boost the real economy by reflating asset prices first. The goldilocks recovery scenario would therefore feature a series of positive catalysts, such as the following: “1) a technical rebound in growth as de-stocking runs its course and trade finance normalizes somewhat in 1Q09; 2) on the back of a policy-induced, liquidity-driven stock market rally (despite weakening fundamentals), the confidence of consumers and private investors is boosted despite job loss and slower sales/income growth, thus preventing too rapid a slowdown in consumption and private investment in late 1Q and 2Q09; 3) the effect of fiscal stimulus starts to show in a major pick-up in public investment growth in late 2Q or early 3Q09; and 4) the G3 economies bottom and stage a tepid recovery in 4Q09, improving external demand and further boosting confidence” (see “Mapping the Recovery in 2009-2010”, China Strategy and Economics: 2009 GDP Recovery Unlikely to Boost Profits or Equities, February 23, 2009).

More here.