ADB cuts China growth forecast to 6.5% in 2016, 6.3% in 2017

BEIJING - Citing weak external demand and slowing investment, the Asian Development Bank has cut its forecast for China’s economic growth in 2016 to 6.5% due to “difficult trading conditions”, but says the impact could be mitigated by an increase in consumption and ongoing Government spending. In its Asian Development Outlook 2016, published on March 30, the bank predicts further slowing in 2017 to 6.3%.

 ADB Chief Economist, Shang-Jin Wei, said: “Weak external demand and excess capacity in some sectors, on top of a shrinking labour force and rising wages, continue to induce a gradual decline in China’s growth rate.”

Shang stressed the importance of supply-side reforms, including providing labour market flexibility, as these could “improve the economy’s resilience to negative shocks and raise its potential growth”.

Last September, the ADB had forecast 6.7% growth for China in 2016. Explaining its reasons for their 0.2% drop in the new forecast, the ADB said: “Moving forward, the sharp slowdown in investment, particularly in real estate and capital intensive industries, will remain a drag on the economy … but this will be partly offset by further Government spending on infrastructure and green investment. Consumption growth will remain robust.”  www.webershandwick.cn (ATI).