The International Monetary Fund (IMF) projects China’s economy to grow by 6.3 percent this year, higher than the previous forecast of 6.2 percent. The fund has also warned of ‘more subdued’ momentum next year.
The outlook partly reflects brighter prospects for trade negotiations between China and the United States. The IMF noted Beijing’s effort to support its economy which has helped “counter the negative effect of trade tariffs.”
“China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US-China trade tensions has improved as the prospects of a trade agreement take shape,” said IMF’s economic counselor Gita Gopinath.
However, the fund downgraded China’s economic growth for 2020 to 6.1 percent from its previous projection of 6.2 percent.
“While the overall outlook remains benign, there are many downside risks. There is an uneasy truce on trade policy, as tensions could flare up again and play out in other areas (such as the auto industry) with large disruptions to global supply chains. Growth in China may surprise on the downside,” said Gopinath.
Europe’s largest bank HSBC is also optimistic about China’s growth for this year. The country’s stimulus-boosted private sector is on track to lead the economy to a “self-sustained recovery” that could see growth hit 6.6 percent this year, it said. HSBC’s projection is higher than the Chinese government’s forecast of between 6.0 percent and 6.5 percent.
“The shape of the stimulus package this time is very different from earlier rounds,” said Hong Kong-based HSBC economists Qu Hongbin and Julia Wang. “We believe that it will not only work, but will also trigger a self-sustained recovery in the coming quarters.”
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