China’s 2016 growth to slow to 6.8 percent, its central bank says

China is expected to grow at a slower 6.8 percent in 2016, the central people’s Bank of China said in a working paper, expecting the number of positive factors to gradually decrease despite downward pressure on the economy.

The rate is slightly lower than the central bank’s forecast of 6.9-percent expansion for 2015.

Citing overcapacity, profit deceleration, and rising non-performing loans as major drags on the economy, the paper said supportive factors such as the recovery of real estate sales, lagging effects of macro and structural policies and some modest improvement in external demand would help underpin broader growth, according to Xinhua.

China’s economy expanded 6.9 percent in the first three quarters. To combat the slowdown, the central bank has cut benchmark interest rates six times since November last year and lowered banks’ reserve requirement ratio several times.

“Based on our models…fiscal and monetary policy changes will have their best effect on the real economy after five to nine months, and China’s pro-growth measures will start to show stronger effects in the fourth quarter of 2015 or the first half of 2016,” the paper said.

For next year, the central bank predicted consumer price index inflation at 1.7 percent and the current account surplus at 2.8 percent of GDP.

Nominal fixed asset investment growth will reach 10.8 percent in 2016, higher than the 10.3-percent prediction for this year, while retail sales are expected to expand by 11.1 percent, according to the paper.

Seeing possible recovery of external demand, the central bank expects export growth at 3.1 percent in 2016 against a predicted 2.9-percent fall for 2015. Imports are expected to rise 2.3 percent as global commodity prices gradually stabilize.

On the risk side, the paper pointed out uncertainties in the domestic and global financial market as a major threat to stability, including the pace of the U.S. Federal Reserve’s interest rate hike.

 

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