(EnergyAsia, August 16 2017, Wednesday) — With an important political convention to be held later this year, China is pulling out all the stops to ensure its slowing economy will turn in a creditable performance for 2017.
After years of expanding by annual rates of more than 10%, the Chinese economy has been growing at less than seven percent under President Xi Jinping who took office in 2013.
While still high by international standards, the new reality of sub-seven percent growth rates worries China which still has to contend with a large population of 380 million rural workers subsisting on just US$4 per day. China’s drive to grow the economy at a fast rate is motivated not only by global competition, but the need to raise the living standards of many of its citizens who are still living in poverty.
In an August report, the International Monetary Fund (IMF) predicts the Chinese economy to grow by 6.7% this year as it did for 2016.
Building on “last year’s policy support, strengthening external demand, and progress in domestic reforms”, the IMF said Beijing is shifting the economy onto a “more sustainable growth path”.
The government has maintained its expansionary fiscal policy and support for credit growth as Xi looks to tighten his grip on power at the communist party’s National Congress likely to take place in November.
Earlier, the Asian Development Bank (ADB) also made the same forecast for the Chinese economy to grow by 6.7% in 2017.
The bank said Chinese consumption remains strong, thanks to rising wages and increasingly generous social spending by the government.
The morning after
Both agencies were less upbeat about China’s prospects once the pumped-up effects of the National Congress wear off from next year.
The ADB said China will continue to face a glut in manufacturing capacity that will constrain future industrial investment growth while saddling it with huge debts. The bank expects China’s economic growth to slow down to 6.4% in 2018 after two consecutive years of 6.7% expansion.
The IMF sees a steady slowdown in China’s economic growth over the next five years, starting with 6.4% in 2018 and 2019. Amid global uncertainties, it will weaken to 6.3% in 2020 and 6% in 2021. The economy will face further resistance, with growth hitting a projected new low of just 5.8% in 2022.