China’s economy is expected to cool further this year as domestic demand weakens and exports are hit by U.S. tariffs, a Reuters poll showed yesterday, reinforcing views Beijing will need to roll out more stimulus measures.
The world’s second-largest economy got off to a strong start in 2018, but pressure soon built as a crackdown on riskier lending pushed up borrowing costs and made it harder for smaller companies to get funding, spurring record bond defaults.
At the same time, the escalating dispute with the United States saw both sides slap tariffs on each other’s goods, disrupting China’s trade sector and weighing on Chinese business and consumer confidence. Slowing demand global is heightening those export pressures.
China’s economic growth is expected to slow to 6.3 percent this year, which would be the weakest in 29 years, from an expected 6.6 percent in 2018, according to median forecast of 85 economists Reuters polled. The economy expanded 6.9 percent in 2017.
Both forecasts were unchanged from the October poll.
“A significant Chinese slowdown may already be unfolding,” Harvard University economics professor Kenneth Rogoff said. A resumption of Sino-U.S trade talks has increased optimism among some analysts that Washington could agree to a further suspension of planned tariff hikes on Chinese goods, originally slated to take effect this month.
However, a comprehensive agreement to end the dispute is seen as unlikely by the negotiating deadline of early March, given the number of highly divisive and politically sensitive issues on the table.
Even if the two sides are able to reach a durable trade deal, analysts said it would offer only modest relief for China’s economy unless Beijing can rekindle weak domestic investment and demand.
“We expect the economy to soften further this year. Domestic headwinds are likely to stay strong,” analysts at Capital Economics said in a note.
“Output would only be slightly stronger if China avoided further tariffs. And the broader tensions around technology and national security are likely to stay high.” Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 percent this year from around 6.5 percent in 2018.