BEIJING – The World Bank raised by a tenth its forecast for China’s economic growth this year, up to 6.8 percent, according to a report released on Tuesday.
However, the WB maintains its forecast for the next two years, with growth reductions in 2018 (6.4 percent) and 2019 (6.3 percent) given that Beijing is applying restrictive measures to reduce risks and deepen reforms.
The report highlights that the recovery of world trade has been an important factor in the maintenance of China’s economic activity this year.
Other positive factors have been the continuation of reforms to reduce leverage, increased business confidence, job creation, stabilization of capital outflows, and appreciation of the yuan against the dollar.
“The authorities have undertaken a host of policy and regulatory measures aimed at reducing macroeconomic imbalances and limiting financial risks without notable impact on growth,” said John Litwack, chief WB economist for China.
The report recalls that the Chinese government since 2016 has launched important measures to reduce leverage of the economy such as a more restrictive monetary policy and a set of rules to reduce financial risks which has resulted in a decline in credit growth.
These restrictive measures, together with the continuation of government reforms, make the WB anticipate a slowdown in economic growth over the next two years.
Prudent monetary policy, a stricter regulation of the financial sector, continuation of the central government’s effort to restructure the economy and control leverage will, predictably, contribute to this moderation in growth, said the report.
According to Elitza Mineva, co-author of the WB report, “favorable economic conditions make this a particularly opportune time to further reduce macroeconomic vulnerabilities and pursue reforms that target ‘better quality, more efficient, fairer, and more sustainable development.’”