China’s economic growth is expected to slow to 6.5 percent in 2016 from a forecast 6.9 percent in 2015, prompting the government to ease policy further, a Reuters poll showed.
Moderating growth will raise pressure on policymakers to do more to boost activity, especially after a renewed plunge in Chinese stock markets and a sharp slide in the yuan currency have stoked concerns among global investors about the health of the world’s second-largest economy.
Additional policy support might include a 25-basis-point (bps) reduction in benchmark interest rates and another 200 bps of cuts in the amount of cash that banks must hold as reserves (RRR) by the end of 2016, analysts surveyed by Reuters said.
In a bid to avert a sharper slowdown, China’s central bank has cut lending rates six times since November 2014 to 4.35 percent, and lowered the amount the cash that the biggest banks must hold as reserves to 17.5 percent.
“With the government policy gradually gaining traction in the first half of 2016, we expect GDP to grow 6.8 percent this year,” said Shen Lan, an economist at Standard Charted in Beijing.
“We think economic growth will continue to be propelled by investment in short term while fiscal policies will play a bigger role in putting a floor under the economic growth.”
The highest GDP forecast in the poll was 7.0 percent and the lowest was 5.5 percent. The medium forecast of 6.5 percent for 2016 would be the slowest in China since 1990.
China is set to release 2015 fourth quarter and full-year GDP data on Jan.19, which is expected to show the economic growth cooled to its weakest rate since the global financial crisis.
Chinese officials have reassured that China’s economy likely grew by around 7 percent in 2015, in line with the government’s plan.
Still, growth of 7 percent would be the slowest in a quarter of a century, and down from 7.3 percent in 2014 as weak demand at home and abroad, industrial overcapacity and faltering investment weigh on the economy.
Some China watchers fear real growth levels could be much lower than official data suggest.
Reflecting sluggish economic performance, annual inflation is forecast to average 1.7 percent this year, before quickening a touch to 2.0 percent in 2017.
Source: Reuters (Reporting By Xiaoyi Shao and Shaloo Shrivastava; Editing by Kim Coghill)