China central bank chief economist forecasts 6.8% growth in 2016 by Gabriel Wildau in Shanghai

News    2016-12-01 13:59:37

The chief economist for China's central bank forecasts that the economy will grow 6.8 per cent in 2016, well ahead of independent estimates from the International Monetary Fund and most private economists.

The chief economist for China's central bank forecasts that the economy will grow 6.8 per cent in 2016, well ahead of independent estimates from the International Monetary Fund and most private economists.

After a bout of currency depreciation and weak data earlier in the year, sentiment towards China has improved in recent weeks as the latest data suggest government stimulus efforts have helped prevent a sharp fall-off in investment.

In its semi-annual economic forecast published late on Wednesday, the People’s Bank of China’s research bureau forecast that growth will fall comfortably within the government’s target range of 6.5 per cent to 7 per cent and close to last year's 6.9 per cent.

The IMF and Asian Development Bank both forecast 6.5 per cent growth for this year. Growth projections by private economists average 6.7 per cent for the second quarter, according to a Reuters poll, following 6.8 per cent growth in the first three months.

“The strength of fiscal policy has been increased, and real estate and infrastructure investment have accelerated, but private investment remains weak,” the research bureau, led by China economist Ma Jun, said in its report. The bureau’s forecasts do not represent the PBoC’s official view. Mr Ma was formerly chief China economist at Deutsche Bank.

The new forecasts come as inflation data on Thursday showed wholesale price deflation pressures easing in May, a positive sign for China’s struggling manufacturing sector. The producer price index, which measures prices at the factory gate, fell 2.8 per cent in May from a year earlier, an improvement on April’s 3.3 per cent contraction.

Producer prices have fallen on an annual basis for 50 straight months, but the pace of decline has narrowed for the last five, aided by a rebound in global commodity prices. In month-on-month terms, producer prices have risen for three consecutive months. An official manufacturing survey released last week showed China’s factory sector expanded for a third straight month.

Less deflation will reduce pressure on Chinese authorities to adopt further monetary easing, analysts say. That could help slow the worrying build-up of corporate and local government debt.

“The upshot is that (weak) inflation is unlikely to become a major concern for policymakers this year, allowing them to focus on more pressing issues such as financial stability and structural reform,” Julian Evans-Pritchard, China economist at Capital Economics, wrote on Thursday.

PBoC researchers also presented an optimistic forecast for retail sales, raising their estimate for full-year growth to 11.1 per cent from the 10.7 per cent projection published in December. But they revised down their forecast for export growth from 3.1 per cent to negative 1 per cent, citing weak global demand. Exports fell 4.1 per cent in May.

Trade data on Wednesday also pointed to stabilising Chinese demand , with imports falling 0.4 per cent in May, a big improvement from April’s 10.9 per cent fall