Central bank chief predicts growth of 7%
Print Edition
CHINA’S central bank governor said the economy could grow 7 percent in the second half of this year, accelerating from the first six months and defying widespread expectations of a slowdown.
While China produced forecast-beating growth of 6.9 percent in the first half, many economists and investors expected fading momentum later in the year.
Those views are largely predicated on three factors — higher borrowing costs; increased property curbs to cool prices; and the shutting of some steel mills and factories to reduce air pollution.
But the driving force behind growth has been mainly rising household consumption, Zhou Xiaochuan said in remarks published on the People’s Bank of China’s website yesterday.
“China’s economic growth has slowed over the past few years ... but economic growth has rebounded this year, with GDP reaching 6.9 percent in the first half, and may achieve 7 percent in the second half,” Zhou was quoted as saying at the G30 International Banking Seminar in Washington on Sunday.
The government’s 2017 growth target is around 6.5 percent. Zhou’s estimate implies expansion of about 6.95 percent.
Economists had expected growth to ease to 6.8 percent in the third quarter and 6.6 percent in the fourth, but the impact of the shutdowns is a wild card.
“Growth in the second half will be slower ... I don’t think 7 percent growth is very possible,” said Xu Hongcai, deputy chief economist at the China Center for International Economic Exchanges think tank in Beijing.
“Investment and consumption growth have eased. And foreign trade is not likely to be as strong as in the first half.”
Last week, the International Monetary Fund reiterated its stance that there may be a greater chance of a sharp slowdown in China if authorities delay the withdrawal of stimulus as they focus on growth targets.
China will report third-quarter gross domestic product on Thursday. September data so far has shown imports and bank lending grew more than expected, while exports picked up.
Other data on Thursday is expected to reinforce the view that China is still in high gear, with growth in industrial output and retail sales seen accelerating while fixed investment may hold at a roughly steady pace.
Private business surveys, however, suggest the recovery has not been balanced, with large state-run firms reaping more of the benefits from robust growth than smaller, private companies who don’t enjoy the same access to cheap credit.
Zhou also said China remains confident in its ability to fend off systemic risks and keep its fundamentals healthy and stable.
Risks in so-called shadow banking have eased somewhat, while non-performing loans are still at a relatively low level, the central bank said.
Chinese authorities are trying to walk a fine line by containing riskier types of financing and slowing a build-up in debt without stunting economic growth.
Raymond Yeung, chief economist for China at ANZ in Hong Kong, said China needs to pay attention to high loan growth even if more funds are now flowing into real investment rather than speculative activity.
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