Asia: China lowers economic growth forecasts due to weakening prices

Most Asian stocks were higher on Tuesday, though property markets were a worry for both Australia and China, with the weak property market leading the People's Bank of China (PBoC) to warn of cooling growth while the Reserve Bank of Australia is worried about high prices.

China’s Shanghai composite rose 0.58% and Hong Kong’s Hang Seng was 0.24% higher ahead of the Chinese Lunar New Year. Chinese markets will be closed from Wednesday for a week of holidays.

The rise in Chinese stocks came despite weaker property market data on Tuesday. House prices declined 5.1% in January compared to a 4.3% fall the month before, according to the National Bureau of Statistics.

Mike van Dulken from Accendo Markets said the data suggests “deepening economic weakness”.

Later, the PBoC research head Lu Lei warned in a newspaper article that economic growth could slow to between 6.9% and 7.1% this year.

Lu said, according to a Reuters translation, that fixed asset investment growth in the world's second-largest economy is likely to cool further this year, dragged by the weakening property market and a fall-off in state investment.

"China's economic growth rate may remain stable at a relatively lower level in 2015, between 6.9 percent and 7.1 percent, restricted by sluggish demand," Lu wrote in a comment piece.

"The biggest medium-term uncertainty for the economy is deflation risk."

He said "it is difficult to anticipate any rise in the producer price index" partly because manufacturers are still struggling to cope with a glut in raw materials, and so forecast that China's consumer inflation would also likely stay weak in 2015.

Viewed positively, economists believe more stimulus may be on the way.

The Chinese business sentiment indicator also dropped to 52.8 from 53.7 in December.

Australia’s ASX also fell 0.52% following the Reserve Bank’s meeting on Monday. The RBA said it remains concerned about the continued strength of house prices.

"Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income," it said.

Economists expect another a rate cut at the next meeting given the slower growth outlook and subdued inflation.

Over in Tokyo, the Nikkei 225 was down 0.1% on European concerns, after Greece's rejection of a proposal by the Eurozone to extend its bailout programme.