BEIJING: China’s economic growth is expected to slow to the range of 6.3 – 6.5 percent (y/y) in 2018 the Year of the Dog in Chinese astrology which would make it the country’s lowest annual GDP growth rate since 1990. Recently, the Deutsche Bank released a report – 2018 China Economic Outlook – in which it states that, after a good 2017, China will be facing several structural challenges in the five years ahead. The year 2017 was a good year for the Chinese economy due to strong consumer and service-sector growth, while the nation’s property market boom continued in tier 3 cities. The government’s supply-side reforms made a positive impact reflected by improved industrial profits. Meanwhile, the global economic environment was also conducive, with strong growth in Japan and Europe. Market volatility remained under control, while China’s currency (renminbi) was strong against the weak US dollar.
However, Deutsche Bank sees several challenges for China in the next five years. Firstly, looming tightening monetary policies around the globe (including interest rate hikes), specifically in the USA, European Union and Japan. This may mean that China’s central bank also needs to implement a tighter monetary policy. Secondly, China’s labor force is shrinking (from 787 million individuals in 2016 to 785.5 million in 2017), while demographically speaking the population is ageing, hence implying the availability of less human resources for the industry sector). Thirdly, there is limited investment in the nation’s property and infrastructure, hence their roles as growth drivers are being curtailed.
