'Chinese economic outlook brighter for 2016'

23 Dec '15

3 min read

Despite slowing economic growth, China's central bank – the People's Bank of China – has said in a research report that a number of positive factors will gain traction in 2016. But it has also warned that downward pressures on growth such as over capacity profit deceleration and rising non-profit loans will persist, a leading Chinese news website reported quoting the PBC research paper.

Ma Jun, chief economist at the central bank's research bureau, said a baseline forecast for real GDP growth in 2016 is 6.8 per cent, slightly lower than the expectation of 6.9 percent forthis year. For next year, the baseline CPI inflation forecast is 1.7 per cent, he said.

Real estate investment will see a slow rebound, he added.

Sales of China's commercial residential buildings increased by an average 22.4 per cent year-on-year from April to November, much higher than a minus 7.8 per cent year-on-year in the previous 15 months.

Growth in land transfer fees of 300 major cities picked up in the past several months. The recovery of the two indices is expected to restore investors' confidence . However there will be a time delay given the high inventory and weak demand in some small to medium cities, so investment is expected to pick up in the second half of 2016, Ma said.

Macro and structural policies are expected to show delayed impacts. The People's Bank of China has lowered interest rates and the reserve requirement ratio five times since thebeginning of 2015, which has greatly reduced financing costs.

According to Ma, along with the proactive fiscal measures adopted by the government, the policy adjustments are expected to have a measurable impact on CPI over a period of about five quarters. CPIfaces upward risks includingrebounds in oil, and food and real estate prices, while the downward risks include lingering low oil prices and falling commodity prices, led by a stronger dollar.

Services and green industries will be the new drivers. Emerging industries such as culture, entertainment, tourism, housekeeping services, environmental protection treatment, cleanenergy, electric cars, e-commerce and intelligent manufacturing have gradually become newdrivers for the economy.

Demand for housekeeping services will continue to grow thanks to the new "two-child policy" and an aging population. More stringent environmental standards and enforcement willsupport green investment and bolster the development of new energy, energy efficiency and environmental protection, the report said. (SH)

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