China central bank sticks to 2016 growth forecast of 6.8 percent despite weak exports

SHANGHAI (Reuters) - China's central bank said on Wednesday it still expects the economy to grow by 6.8 percent this year, with fixed-asset investment expected to grow more strongly than it expected earlier, helping to offset shrinking exports.

The People's Bank of China (PBOC) also said bond default risks could rise amid deleveraging and government plans to slash overcapacity, and that could affect companies' ability to raise funds.

"Since the beginning of this year, the global and domestic economic environment has experienced a number of changes," the PBOC said in a mid-year work report.

"Reflecting these recent developments, we revised our China macroeconomic forecasts for 2016. Compared with our published forecasts in December last year, we maintain our baseline projection of 2016 real GDP growth at 6.8 percent."

The central bank upgraded its forecast for fixed-asset investment growth to 11 percent, an increase of 0.2 percentage points from estimates it made late last year.

But it slashed its export growth forecast by 4.1 percentage points to minus 1.0 percent. China's trade shrank 8 percent last year, compared with the government's goal for 6 percent growth and the worst performance since the global financial crisis.

Data earlier on Wednesday showed China's exports fell more than expected in May as global demand remained stubbornly weak, but imports beat forecasts, adding to hopes that the economy may be stabilising.

The PBOC also said it expected consumer price inflation to be 2.4 percent this year, up by 0.7 percentage points from its earlier forecast and signalling that deflationary pressures seen in 2015 were easing.

China's economy grew 6.7 percent in the first quarter, its slowest pace in seven years.

Indicators from the consumer, investment and factory sectors have suggested the prolonged slowdown in the world's second-largest economy may be bottoming out, but most analysts do not expect a quick recovery.

(Reporting by John Ruwitch, Laura Lin and Lu Jianxin; Editing by Jacqueline Wong and Kim Coghill)

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