World Bank Raises China Growth Forecast to 6.8% Based on Increased Consumption, External Conditions
Xu Wei
/SOURCE : Yicai
World Bank Raises China Growth Forecast to 6.8% Based on Increased Consumption, External Conditions

(Yicai Global) Dec. 19 -- The World Bank has raised China 2017 GDP growth forecast to 6.8 percent, up from 6.7 percent in October, based on increased domestic consumption and improving external conditions, the 189-member international financial institution said in a report today.

Supported by rising household incomes, the growth contribution of consumption climbed further this year and the GDP growth has remained strong in 2017, exceeding market expectations, said the report entitled 'China Economic Update - December 2017.'

The growth contribution of fixed investments has declined notably, driven by both government efforts to limit local government off-budget financing of public investment and weaker private investment.

The recovery in global trade has been an important factor supporting economic activity in China in 2017. Net exports contributed positively to growth for three consecutive quarters. Owing to favorable global financial conditions, as well as stricter implementation of capital controls and greater domestic market confidence, capital outflows from China declined to US$47 billion in the first three quarters of 2017 from US$640 billion in 2016.

The yuan appreciated by 5 percent against the US dollar over January-November 2017, the report added.

The World Bank kept its China's GDP growth forecast for 2018 and 2019 unchanged. The GDP growth will decline from 6.8 percent in 2017 to 6.4 percent in 2018 and 6.3 percent in 2019 primarily due to less accommodative monetary policy and new policies to rein in credit and control leverage, it said.

Prudent monetary policy, stricter financial sector regulation, and the government's continuing efforts to restructure the economy and to rein in the pace of leveraging are expected to contribute to the growth moderation, the Washington-based lender said.

The key downside risk to the outlook is related to the still rising, albeit at a slower pace, leverage of the non-financial sector and uncertainty related to property prices, it warned.

Despite the recent slowdown, credit continues to grow considerably faster than GDP, the report found. "Outstanding bank loans reached 150 percent of GDP in November 2017, up from 103 percent at the end of 2007. Total credit to the non-financial sector, including central and local government, was 242 percent of GDP in November 2017, about 100 percent higher than before the global financial crisis."

A sharper slowdown in property price growth is likely to weigh on household consumption through a wealth effect and on the construction and real estate sectors, the report added.

Follow Yicai Global on
Keywords: World Bank , Economy Growth