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Global organizations, banks upbeat on China growth prospects

Xinhua | Updated: 2017-01-24 09:21

BEIJING - Despite the challenges of transitioning to a more innovation and service-driven economy, China in 2016 pushed forward key reforms and achieved steady growth, with many international agencies and banks sanguine about China's growth outlook this year.

End on a strong note

Supported by consumer spending and the service sector, China's GDP grew 6.8 percent in the fourth quarter of 2016 and the full-year GDP growth stood at 6.7 percent.

The economic growth rate in 2016 was a slight slowdown from 6.9 percent registered in 2015, but was within the government's target of between 6.5 and 7 percent and outpacing most other major economies.

With the global economy facing uncertainties like trade protectionism, the International Monetary Fund (IMF) last week revised its China's growth forecast for 2017 to 6.5 percent, from the 6.2-percent projection last October, based on expectations of continued policy support for the economy.

"Global activity could accelerate more strongly if policy stimulus turns out to be larger than currently projected in the United States or China," the Washington-based global lender said in its World Economic Outlook (WEO) Update report.

The IMF's projection was largely consistent with its sister agency World Bank, which kept its forecast for China's economic growth rate for 2017 unchanged at 6.5 percent despite softness of external demand and overcapacity in some sectors.

In its flagship "Global Economic Prospects" report released earlier this month, the World Bank lowered the global growth forecast for 2017 but kept its forecast for China's economic growth rate for 2017 unchanged at 6.5 percent, as the global economy is clouded by uncertainty about policy direction in major economies.

It seems that many global organizations and investment banks predictions are around 6.5 percent for the Chinese economic growth in 2017.

J. P. Morgan China chief economist Zhu Haibin forecast that China's economic growth pace will slow to 6.5 percent in 2017, under pressure from weakness in real estate and auto sectors, somewhat offset by strength in financial services.

The economy ended on a strong note in 2016, but a slowdown in property activity may drag GDP growth down to about 6.4 percent in 2017, even though property investment in the first quarter may remain relatively robust, the UBS said in a report last week.

Challenges ahead

However, Chinese policymakers are confronted with a string of challenges in the year ahead, such as fast credit growth, high corporate debt and rising inflationary pressure, which might be exacerbated by capital outflow pressure and an unsettled external environment.

Continued reliance on policy stimulus measures, with rapid expansion of credit and slow progress in addressing corporate debt, especially in hardening the budget constraints of State-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment, cautioned the IMF.

"Elevated credit growth, which has been accompanied by rapidly rising housing prices, is an important challenge," the World Bank warned.

China will likely witness a modest slowdown in the housing market with regional divergence together with a pick up in producer price index (PPI) inflation to an average of about 5 percent in 2017, Zhu predicted.

"Monetary policy faces a tradeoff between growth, inflation, financial risks and capital outflow pressure. Maneuvering room for monetary policy is limited," he added.

China's macro policies will likely strive to strike a fine balance between supporting growth and controlling financial risk, with credit growth slowing only modestly, the UBS noted.

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