‘Major fiscal surgery’ needed to stop China growth rate dropping below 6 per cent in first half of 2019, economist says
- GF Securities chief economist Shen Minggao offers bearish outlook due to the ongoing US trade war despite last week’s 90-day trade truce agreed between President Xi Jinping and US counterpart Donald Trump
- Impact on exports to be more pronounced in coming months even after deal at G20 summit in Buenos Aires, Argentina
Without a major fiscal policy boost, China’s economic growth could drop below the psychologically important rate of 6 per cent in the first half of next year due to the effects of the US trade war and the expected weakening in the domestic property market, infrastructure construction and manufacturing investment, a prominent Chinese economist has warned.
The downward pressure on the country’s traditional growth drivers – exports and investment – will continue to grow in the period ahead, with consumption needing further support to be able to compensate, according to GF Securities chief economist Shen Minggao.
Shen’s projection is the one of more bearish on the outlook for the world’s second largest economy, which is engaged in a bitter trade war with the United States and is undergoing a painful domestic transition to climb up the industrial value-added chain while shifting to a consumption-led growth model.
The bearish prediction came even as Swiss bank UBS increased its GDP growth forecast to 6.1 per cent on Monday, as it expects to see “a less sharp slowdown in China’s exports and GDP growth” in the first quarter, given the ceasefire between the world’s two largest economies.
“While we do not expect the two sides to reach a grand deal before March 2019, we think the probability of further delays in additional tariffs as the two sides negotiate beyond March 1 has significantly increased,” Tao Wang, the bank’s chief China economist, said in a research report. “As a result, we now expect exports not to slow as sharply in Q1 2019 as originally envisaged, and the full year export growth to be slightly stronger than forecast earlier.”