China claims foreign banks upbeat about its economy

Weak US recovery and the persistent Eurozone crisis make China a better bet.

The government said a huge amount of overseas capital has entered the country’s stock and foreign exchange markets in order to earn from China’s economic recovery and reform.

Almost all foreign banks voiced worries about a possible hard landing for the Chinese economy in 2012. China’s economic growth rate hit a 13-year low in 2012 at 7.8%, further fueling fears that the hard landing might still be in the cards this year.

The government, however, noted that DBS Bank predicted the Chinese economy could grow 9% this year driven by domestic demand. Deutsche Bank said that China’s economic growth rate may rise to 8.5% in the second half of this year, and peak at 9% in the first half of 2014.

Analysts attribute China’s economic recovery to increasing infrastructure investment, lower home inventories and higher corporate earnings.

The market is optimistic about the renminbi’s performance this year. Some bankers believe the renminbi or yuan is close to its fair value, and will appreciate slightly this year. They expect the renminbi’s exchange rate against the U.S. dollar to reach 6.18 and 6.12 at the end of this year and into 2014.