World Bank predicts slower economic growth in China
January 15, 2019 Category China News Round-up, Weekly
A World Bank report titled “Darkening Skies” has forecast China’s growth for 2019 will drop by a further 0.1 of a percentage point over concerns of “weaker exports”, with many other institutions joining the World Bank in predicting a deepening slowdown in the world’s second biggest economy. The World Bank’s projection for Chinese growth this year is in line with estimates by both Chinese and foreign forecasters, which fall in a range of 6.0% to 6.5%, down from an estimated 6.6% in 2018.
The latest prediction comes at a time when doubts are rising over the trustworthiness of the Chinese official gross domestic product (GDP) growth rate, which has been extremely steady within a narrow range of 6.5% to 7.0% over the last 15 quarters. Most institutions are predicting a growth rate of 6% or above – UBS predicted 6.1%, while the Chinese Academy of Social Sciences (CASS) said 6.3%. Beijing has officially put a brave face on the economic slowdown, but the Chinese leadership has been edging towards a serious stimulus package, including more fiscal spending and monetary easing, to bolster growth.
The World Bank warned that additional stimulus may have the undesirable effect of slowing the country’s “deleveraging” program to reduce debt and risky lending. The Chinese government switched policy priorities in the summer to focus on stabilizing economic growth in response to the effects of the trade war with the U.S. At the Central Economic Work Conference last month, the top leadership led by President Xi Jinping made clear that the economic policy priority for 2019 would be to build a resilient domestic market to counter external forces. Pro-growth measures are already in the pipeline after the People’s Bank of China (PBOC) announced that it will cut the required reserve ratio – the amount of money that banks must hold in reserves at the central bank – by a full percentage point in January, freeing up CNY1.5 trillion for new lending. In addition, the Ministry of Finance has already allocated quotas for local governments to sell new bonds months earlier than in previous years to ensure there is sufficient funding to maintain the infrastructure construction momentum started last year.
The first quarter is widely expected to be a tough time for Beijing’s policymakers since easing measures from last year may have not yet taken full effect, while the U.S. tariffs could push the quarterly growth rate to a record low. “If a trade war between the United States and China contributes to a global slowdown, the spillover effects on emerging market and developing economies could be profound,” warned Shantayanan Devarajan, the World Bank’s Senior Director for development economics, as reported by the South China Morning Post.
- KURT VANDEPUTTE (UMICORE) APPOINTED CHAIRMAN OF THE BOARD OF THE FLANDERS-CHINA CHAMBER OF COMMERCE (FCCC)
- Webinar: “Knowing Your Chinese Partner” – May 26, 2021, 10 am – 12 am
- EMA starts rolling review of CoronaVac, WHO approves Sinopharm vaccine for emergency use
- The Global Times warns not to politicize the Comprehensive Agreement on Investment (CAI)
- Hainan to become biggest duty-free market in the world