(Yicai Global) April 12 -- China’s gross domestic product will expand at a 6.6 percent clip this year, slower than last year’s 6.9 percent, according to the latest forecast from the Asian Development Bank (ADB).
Growth will be driven by strong domestic consumption, rising consumer confidence, export growth, and steady government spending, ADB said in its Asian Development Outlook (ADO) 2018 released yesterday. But Beijing still needs to carry out tax and other structural reforms to achieve sustained inclusiveness and sustainable development, the report added.
With the gradual tightening of fiscal and financial policies, this year’s GDP growth will be slower than in 2017, the report said. Growth will decelerate further to 6.4 percent next year, it added.
“The PRC [People’s Republic of China] government is on track to meet its goal of transitioning the economy to a more consumption and services-driven one,” said Yasuyuki Sawada, ADB’s chief economist. “Comprehensive fiscal reforms, particularly with respect to income taxes and social security contributions, will help the country raise revenues to fund social services, address inequality, and enhance productivity.”
China’s leaders are steering the world’s second-largest economy away from a growth model rooted in resource-based manufacturing, investment and exports toward one focused more on domestic-driven services, private consumption and innovation.
China aims for economic expansion at about 6.5 percent this year, unchanged from 2017, according to the government work report. “Given China's economic fundamentals and capacity for job creation, GDP growth of around 6.5 percent will enable China to achieve relatively full employment,” Premier Li Keqiang said on March 5.
Growth Drivers, Risks
Consumption will again push growth in 2018 due to high wage growth, rising consumer confidence, and higher government social spending, ADB said.
“Consumer-oriented industries are expected to perform strongly in 2018,” it said. “Inflation is projected to increase to 2.4% in 2018 and 2.3% in 2019 as food prices normalize, consumer demand strengthens, and price deregulation, particularly for healthcare, continues.”
ADB also listed some negative factors that could affect China’s economic growth this year, particularly “lower commodity prices, which could dampen strong export demand from commodity producing countries; deteriorating global trade conditions, which could undercut PRC exports and investment; capital outflows resulting from rising US interest rates and a strengthening dollar; a continued slump in domestic investment growth; and sustained regulatory tightening, which could cause liquidity shortages.”
However, strong finances and government support puts economy in a good position to weather these risks, ADB added.