Another Bank Moderates Its Growth Outlook for China

Published By : 06 Oct 2015 | Published By : QYRESEARCH

The economics team of Nomura Asia has cut down their expectations for economic growth in China next year. The team has forecasted that the Chinese economy would expand at about 5.8% compared to the early expectations of 6.7% growth in the next year. The team comprising of Changchun Hua, Wendy Chen, and Yang Zhao has pointed out that the slowing property investment growth is the major factor pulling down the overall growth of the economy. The property investment growth might turn negative and can drag down the fixed asset investment growth to single-digit levels in 2016. 

It has been further noted that the significantly high contribution from the financial services sector towards GDP growth in H1 2015 will be normalized with correction in the equity market. The team has suggested that the government would eventually lower its growth target for the next year to 6.5% from 7% this year in an attempt to keep a balance between the growth rate and the ongoing process of economic restructuring. The economic growth in China is being now driven by consumption and the services sector. Earlier, it was pushed by investment and related manufacturing sectors. As there is a rebalancing process going on, this will affect the overall speed of growth.

The trio expects that the People’s Bank of China (PBOC) will continue with interest rate and reserve ratio cuts over the course of the next year. This will make it easier for the economy to sail through. Though slower economic growth will result in higher unemployment and growing financial risks, easing policy by the central bank will lead to lowering of the systemic risks.

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