China think tank becomes first government-linked body to predict 2020 growth will drop below 6.0 per cent

National Institution for Finance and Development says China’s economic growth rate will slow to 5.8 per cent in 2020 from an estimated 6.1 per cent this year

This is at the bottom end of China’s target range of 6 to 6.5 per cent growth for 2019 and is in line with the International Monetary Fund

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China’s economy started to slow from 2011, with its growth rate already dropping to 6.0 per cent in the third quarter of 2019, the slowest rate since quarterly growth data was first published in 1992. Photo: AFP

Published: 5:00am, 14 Nov 2019Updated: 8:47am, 14 Nov 2019

A Beijing-based think tank has become the first Chinese economic research institute linked to the government to predict that China’s economic growth rate will slow below 6.0 per cent next year.

The National Institution for Finance and Development (NIFD) on Wednesday said that China’s economic growth rate will slow to 5.8 per cent in 2020 from an estimated 6.1 per cent this year.

This is at the bottom end of China’s target range of 6 to 6.5 per cent growth for 2019, and further indicates the continued downward pressure on the economy from the trade war with the United States as well as domestic headwinds.

The economic slowdown is already a trend. We must resort to deepened supply-side structural reform to change it or smooth the slowdown, rather than solely rely on monetary or fiscal stimulus

Li Yang

“The economic slowdown is already a trend,” said former central bank adviser Li Yang, who heads the institute that is affiliated to the Chinese Academy of Social Sciences (CASS). “We must resort to deepened supply-side structural reform to change it or smooth the slowdown, rather than solely rely on monetary or fiscal stimulus.”

The institute’s forecast is in line with the International Monetary Fund, and indicates the challenge that policymakers face to achieve the above 6 per cent growth rate needed in 2019 and 2020 to reach the government’s goal of doubling gross domestic product in 2020 compared to its 2010 level.

According to the NIFD, China’s exports will be negatively affected for a long period amid the slowing global economy, private investment may be dampened by trade war uncertainties, while the effects of countercyclical policies will only begin to be evident in the first quarter of next year.

Li said the government’s fiscal deficit problem will stand out in the future, adding that the central government may have to issue more bonds to fulfil its expenditure responsibilities. This could demand more bond holdings by the central bank and better coordination and institutional arrangement between fiscal and monetary authorities.