Summary: In today's China Money Podcast, our host Nina Xiang reviews the most important investment news of the week. http:///www.ChinaMoneyPodcast.com - Goldman Sachs/Gaohua cuts their growth forecast for China's economy to 7.6% from a previous 7.9% this year. It also cuts forecast for 2013 down to 8% from 8.5% previously. It cites a number of reasons for this cut: modest policy easing, upcoming leadership transition; weaker external demand and structural challenges. Other investment banks, including UBS, Barclay's and Chinese banks, have similarly cut China's growth this year by half a percentage point to around 7.5% from a previous level of around 8%. - One major cause for this downgrade is that the Chinese government hasn't stimulated the economy as aggressively as people were projecting. During the past couple of months, banks have been predicting multiple cuts of Chinese banks' reserve ratios and interest rates. But the last time China's central bank lowered reserve ratio was in May, and it has only lowered rates twice this year so far. Of course, it can still happen during the next few months, but any policy stimulus won't be reflected in the economy right way. In addition, a weak US economy and the debt crisis in Europe have hit China's export industry quite hard. A survey by Reuters shows that August export growth might be as low as 3 percent year on year. If true, that would be the weakest August since 2009 during the depth of the global financial crisis. - Inflation data released yesterday also shows that consumer prices are picking up again, with CPI up 2% year-on-year. Inflation pressure is likely to keep elevated during the rest of the year, making China Central Bank more cautious about any monetary loosening. - 2012 might be the year of paradigm change for China. Last time China's economy grew around the level of 7.5% was 13 years ago in 1999 and 1998 during the Asian financial crisis, when economy grew 7.6 and 7.8% respectively. Many agree that this time around, the slowdown is caused more by internal and structural challenges than external shocks. An investment-fueled growth model might be nearing an end.
