Fresh forecasts point to 6.5% growth easily being met

Updated 2017-06-30 10:05:24 China Daily

The Chinese economy - in the wake of recent upbeat data underscoring an industrial recovery - is expected to enjoy stable growth and is capable of reaching the growth target of around 6.5 percent for the whole year, according to forecasts released on Wednesday.

A report issued by the research institute of the Bank of China predicted that China's economy will likely expand by around 6.8 percent year-on-year in the second quarter and by 6.7 percent in the third quarter.

The economy will grow this year at an annual rate of 6.8 percent, the report added.

The prediction is largely in line with a former central bank consultant's forecast on the same day during the Summer Davos forum in Dalian, Liaoning province.

China's economic growth remains solid and is expected to reach 6.7 percent this year and 6.9 percent in 2018, according to Li Daokui, an economist at Tsinghua University and former member of the People's Bank of China's monetary policy committee.

He said employment and strong demand for consumption will support the economic growth.

After economic growth hit 6.9 percent year-on-year growth in the first quarter, a number of institutions have raised their forecasts, keeping a fairly optimistic view of future growth prospects.

"There might be slight differences between institutions on the predictions for the headline growth number, but in general expectations have improved compared with late last year," said Zong Liang, chief economist with the Bank of China research institute.

The improved outlook has to do with strong growth in consumption, Zong added, saying more importantly, signs of an uptick appeared in industrial activity, which witnessed a drop last year.

Official data on Tuesday showed profits at China's industrial companies surged 16.7 percent in May from a year earlier, accelerating from 14 percent in April.

The indicator has picked up since the beginning of this year, up from only 2.3 percent in December.

Analysts said the producer price index, which measures factory-gate prices and reflects the state of corporate activities, has stopped falling and picked up in recent months, meaning corporate profits will rise and investment will increase.

"Recent data confirm our view that the economy has been on the track of recovery," said Gao Yuwei, a researcher with the Bank of China.

Gao added that in the meantime, the government needs to strike a balance between stabilizing growth and lowering leverage ratios in the second half of this year to sustain the good trend. That is because policy tightening, which helps curb risks, will lead to higher borrowing costs and hurt economic activity.

Thanks to sound economic fundamentals, pressure on the yuan to depreciate will be eased in the future, according to Wang Youxin, a researcher with the Bank of China.

He said the yuan faces pressure in the coming months, mainly driven by the U.S. Fed's policy normalization plan.

"But it is not likely to see a sharp depreciation, as happened in late 2016," he said.

At the end of 2016 investors bet on a continued depreciation of yuan, partly supported by President Trump's election win and expectations for U.S. interest rate hikes.

The yuan hit a rate of close to 7 yuan per dollar in December, its lowest levels in eight and a half years.

Jameel Ahmad, vice-president of corporate development and market research at ForexTime, said he expected the yuan to appreciate in the second half the year.

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