BEIJING: The Asian Development Bank expects China’s economic growth to moderate to 7.2 percent this year and 7 percent in 2016 as the Chinese government pursues a program of structural reforms and slower rate, the Manila-based bank said in a report here the other day.
“China is likely to retain its position as the biggest contributor to the world’s economic growth in both 2015 and 2016,” the bank said in its annual economic publication Asian Development Outlook 2015.
The projection was higher than the official growth target of around 7 percent set by the central government earlier this month at the annual session of the National People’s Congress.
The bank said China’s economy can continue to deliver solid growth as long as the government makes steady progress on its reform agenda to elevate productivity.
“There are natural forces for growth moderation such as a shrinking working-age population and rising labor costs,” said ADB Chief Economist Shang-Jin Wei. “Deepening financial sector reform, such as reducing the dominance of state-owned banks and liberalizing interest rates while preserving financial stability, is key element of the needed reform package.”
China’s gross domestic product expanded 7.4 percent from a year earlier in 2014, the slowest pace in 24 years. The moderation was led by corrections in the property market, and as a result, investment in real estate was halved from a year earlier in 2014 and remained weak.
“While 2015 and 2016 growth will decelerate further, the slowdown will be limited through productivity improvement resulting from domestic reforms, lower commodity prices, strong domestic consumption growth and steady recovery of high-income markets for China’s exports,” Wei said.
The strengthening of the yuan against currencies of most of China’s trading partners may continue in 2015, which is in line with a strong appreciation of the US dollar, the bank’s report said.
“It is time to ask whether the yuan has become an overvalued relative to fundamentals,” Wei said, suggesting a more market-determined exchange rate could increase the country’s competitiveness.
