HSBC: Why We Are Still Bullish on China

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Chinese economic data for April has largely underperformed market expectations prompting many economists in recent days to rethink their growth projections for the world's second largest economy.

Still, one bank remains optimistic about the prospects for the economy, expecting a reacceleration in gross domestic product (GDP) growth in the months ahead.

Among the major banks, HSBC has the highest growth forecast for China at 8.2 percent for 2013, according to a Wall Street Journal poll of 12 banks published on Tuesday. Societe Generale, by contrast, has the most bearish view on the economy, projecting 7.4 percent growth this year.

(Read More: China's Q1 GDP Growth Slows Unexpectedly to 7.7%)

What's keeping HBSC upbeat? The bank expects robust credit growth to translate into a pick-up in investment in the coming months.

"We still believe the Chinese have applied quite a bit of stimulus both on the fiscal side - which takes some time to be rolled out - and on the monetary side," Frederic Neumann, Co-Head, Asian Economic Research at HSBC said on CNBC Asia's "Squawk Box" on Wednesday, referring to the faster-than-expected growth in total social financing in the first quarter.

(Read More: Is China Really Mulling a Lower Growth Forecast?)

The volume of social financing, which is a broad measure of liquidity in the economy, rebounded to 2.54 trillion yuan ($413 billion) in March from 1.07 trillion yuan in February, close to the record high of 2.542 trillion set in January 2013.

"That has an impact on growth with a 2-3 quarter lag - and that's what we are banking on. We would counsel some patience," he said.

(Read More: China Shaping Up for Another Disappointing Quarter)

In addition, benign inflationary pressures leave room for Beijing to keep policy relatively accommodative to sustain China's growth recovery, the bank said in a recent note.

"Apart from keeping credit growth steady, Beijing still has room to cut taxes and further deregulate to encourage private investment via further reforms."