OECD Raises China Growth Forecast And Risks To It

THE OECD HAS edged up its growth forecast for China this year to 6.7% from the 6.6% it projected in November but holds its 2019 forecast unchanged at 6.4%. The revised numbers are contained in the newly published interim Economic Outlook from the rich countries’ think tank.

Overall, the OECD sees a steady or improving expansion across most G20 economies thanks to the bounce back of trade and private investment, with fiscal stimulus in the United States and Germany providing a boost to short-term growth, while inflationary pressures are subdued. Specifically, on China it says

Growth surprised on the upside in China in 2017, helped by a strong rebound in exports, but is set to soften to just below 6½ per cent by 2019. Macroeconomic and regulatory policies are gradually becoming more restrictive, the working age population is now declining and credit conditions are less expansionary. Regulatory efforts are continuing to reduce financial risks, deal with overcapacity in some sectors and improve environmental quality. Fiscal policy is now broadly neutral, but additional measures could be implemented if output growth were to slow more sharply.

However, the risks to its general forecast all threaten particular vulnerabilities of the Chinese economy: tightening monetary policy in the advanced economies, high debt and asset valuations, and a potentially damaging escalation of trade tensions.

The importance of tackling high debt levels is illustrated in this chart.

Chart of G20 total debt, public and private non-financial sector, as % of GDP, 2001-2017. Source: OECD

The OECD calls on Beijing for policy initiatives to reduce the high level of corporate debt, in particular.

The OECD also makes a point of the importance of safeguarding the rules-based international trading system. China has repeatedly been saying the same thing, if somewhat self-servingly and with itself as the guarantor, since long before the Trump administration announced import tariffs on steel and aluminium. It is likely to echo the call again as the United States readies a Section 301 action on intellectual property rights and technology transfer practices aimed at what the US president has flatly called China’s theft of US technology.

Meanwhile, the Trump administration has reportedly told Beijing that it has to come up with a plan to reduce China’s $375 billion trade surplus with the United States by $100 billion within a year.

Advertisements

2 Comments

Filed under China-U.S., Economy, Trade

2 responses to “OECD Raises China Growth Forecast And Risks To It

  1. Pingback: Asian Development Bank Pushes Beijing On Tax Reform | China Bystander

  2. Pingback: IMF Sees China’s Economy With Momentum To Face Headwinds | China Bystander

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s