World Economy

Economists Say China Growth Will Fall to 6.5%

Economists Say China Growth Will Fall to 6.5%Economists Say China Growth Will Fall to 6.5%

Economic experts specializing in China forecast that the country’s gross domestic product will grow 6.5% on average in 2018, down from the estimate of 6.8% for 2017, according to a joint survey by Nikkei Inc. and Nikkei Quick News.

Beijing’s monetary tightening is causing investment in real estate and infrastructure to fall, but solid personal spending and exports will keep the economy from sliding too far, Nikkei reported.

During the country’s recent Central Economic Work Conference to set economic management policies for 2018, Beijing decided to lessen financial risk by trying to curb borrowing by businesses and individuals.

“Beyond the first quarter of 2018, growth should taper more visibly due to the tightening measures on credit and housing,” said Aidan Yao, senior emerging Asia economist at AXA Investment Managers Asia.

Many respondents forecast that the housing market, which was showing signs of overheating mainly in metropolitan areas, will cool. “At the 19th Chinese Communist Party Congress held in October, more emphasis was put on quality and equality aspects of China’s growth model, including environmental goals,” said senior economist at ABN AMRO Bank, Arjen van Dijkhuizen.

Xia Le, chief economist for Asia at BBVA Research, had a similar view. “The Chinese economy will go for a period of moderation, meaning that from this year on, growth will gradually decline.”

As for monetary policy in 2018, many expect that the People’s Bank of China will keep the policy rate and the reserve requirement ratio unchanged. But some think the PBOC may raise the interbank rate slightly to curb borrowing.

“The current economic expansion is mainly fueled by credit growth at the cost of higher leverage in both the household and corporate sectors,” noted Shen Jianguang, chief China economist with Mizuho Securities Asia. “Higher funding and leveraging costs will lead to less investment, thus slowing economic growth, in our view.”

The central bank’s clampdown on wealth-management products will likely deal a blow to regional governments, real estate companies and smaller banks, many of which have relied on the shadow banking system for financing.

Xie Yaxuan of China Merchants Securities expected that the regulations will significantly impact infrastructure investment by regional governments.

However, the government is expected to maintain a cautious approach to policy management to prevent the economy from losing too much steam.



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