Business / Economy

Economic rebound likely in 2016

By ZHENG YANGPENG (China Daily) Updated: 2014-12-23 14:30

Economic growth in China will be around 7.3 percent in 2015, and rebound to 7.5 percent in 2016, on the back of a looser monetary policy, said a report published by China International Capital Corporation, making it the most optimistic forecast on the country's economic prospects for next year.

CICC, one of China's top investment banks, expects the government to cut interest rate twice and reduce reserve requirement ratio four times next year. As macroeconomic policy returns to "counter-cyclical", growth will return to the "potential growth rate", it said.

CICC was, however, categorical in pointing out that China's monetary policy lags behind fast-changing economic reality, and that monetary policy was "in effect too tight" this year. The result is the economy is growing at a pace under its "potential growth rate", which was evident in the low inflation and surge in international trade surplus.

"Monetary policy is officially described as 'prudent' but in effect is 'tight' this year. Next year, we expect the monetary policy to be 'prudent' officially but in effect 'loose'," said Liang Hong, the chief economist of CICC.

Many financial institutions believe China's growth will edge down for the next two years. CICC, however, said as macroeconomic policy returns to the counter-cyclical mode with the dividend of reform kicked in, growth in 2016 could return to "potential growth rate", which means about 7.5 percent.

Separately, according to a central bank survey published on Monday, the number of Chinese bankers who believe the country's economy is cooling increased in the fourth quarter from the third, and the confidence index of bankers dropped.

The People's Bank of China said the survey also showed that in the fourth quarter, the number of bankers who believed monetary policy was "appropriate" increased from July-September.

The survey showed the confidence index of Chinese enterprises fell in the fourth quarter while fewer Chinese residents believed property prices are at unacceptable levels, as home prices show signs of cooling.

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