The OECD’s latest economic outlook sees the slowdown in the growth of China’s economy reversing later this year as fiscal stimulus and monetary easing kick in. It forecasts that GDP growth for the year will be 8.2%, down from 2011′s 9.2%, but the second half momentum will carry through to bring 9.3% growth next year. If the slowdown continues for longer than expected, should, say, the worst outlook for the eurozone come to pass, the OECD says Beijing should bring forward infrastructure spending planned under the current five-year plan.
Inflation is seen as falling below 3% next year. The current account surplus is expected to continue to shrink, to an estimated 2.3% of GDP this year and to 1.7% next year. 2011′s surplus was 2.8% of GDP.
The OECD also calls for more competition in the banking sector, including a start to deregulating interest rates, first for loans and then for deposits. It wants a deposit insurance scheme set up and more private capital allowed into the sector. To expand a more open market for the currency it says capital outflows should be liberalized. This is all pushing at an open door, or at least the OECD adding its weight to the shoves of the reformers. The question, as ever, is timing.