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Economist says no need for panic over China’s slow growth

Economist says no need for panic over China’s slow growth

BEIJING: China’s growth is poised to decelerate this quarter and the road ahead will be bumpy. But don’t panic, says the most accurate forecaster on the nation’s economy.

Growth will slow to 6.7 per cent in the first three months of this year as financial services contributes less to the expansion than a year ago and because policy measures to support growth have tapered off from the last quarter of 2015, says Song Yu, Beijing-based chief China economist at Goldman Sachs Gao Hua Securities Co and the best overall forecaster of China’s economy according to Bloomberg Rankings for the past two years.

Even though full-year growth will drop to 6.4pc in 2016 as wages, employment and consumption “take a hit,” Song says he’s not negative about China’s economic prospects and dismisses dire predictions of a coming collapse.

“Some people are making extreme arguments to say the whole machine is not working. That’s not what we see. Overall, the plane is moving in the direction it should be and it’s broadly under control.”

Policymakers have stepped up support for the economy, with the central bank Thursday guiding interest rates lower by offering to reduce the medium-term borrowing cost it charges lenders, according to a person with direct knowledge of the matter. The nation’s chief planning agency has also made more money available for local infrastructure projects.

Data released Thursday illustrated the room for policy easing, as deflation at the nation’s factories extended for a record 47th straight month in January. Consumer price inflation picked up, led by food costs ahead of the week-long Lunar New Year holiday.

Figures published Monday underscored the challenges the world’s largest trading nation is facing, as imports plunged 18.8pc in January from a year earlier in US dollar terms and exports dropped 11.2pc.

The downward trajectory of growth is set to continue in the next two years, but there’s no reason to panic because policymakers have both ample scope to support growth and can also unleash new growth drivers, he said.

When growth slows, “policymakers will come up with something,” he said.

“Easing has been enough to generate mini ups along a downward trend,” he said.

“And they could have done more. But they chose not to do more and that’s important. They reserved ammo. They want to leave some ammo to protect themselves from extreme tail risk.”

Bloomberg-The Washington Post Service

Courtesy : Dawn News



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