China’s annual economic growth is likely to slow to 6.8 percent next year from an expected 6.9 percent this year, the People’s Bank of China said in a working paper published on Wednesday.
The world’s second-largest economy still faces downward pressure and the impact of fiscal and monetary policies that were rolled out this year will be evident by the first half of 2016, the central bank said in the research report.
“Although downward pressures on growth will persist for a while due to overcapacity, profit deceleration, and rising non-performing loans, we expect that the number of positive factors will gradually increase in 2016,” it said.
Recent appreciation in the yuan’s real effective exchange rate (REER) has put pressure on China’s exports, the central bank report said, adding that keeping the yuan’s trade-weighted exchange rate relatively stable could help exports.
Meanwhile, the Chinese Academy of Social Sciences (CASS), a top government think tank, predicted in its “blue book” the economy could expand at a slower pace between 6.6 percent and 6.8 percent in 2016 due to weak external demand and cooling domestic investment.
The think tank recommended that China should widen its fiscal deficit to 2.12 trillion yuan ($327.6 billion) next year from a planned 1.62 trillion yuan in 2015, keeping the deficit to GDP ratio within the warning level of 3 percent. Read more