China growth outlook raised on supportive policies

Beijing, Nov 2 (IANS) A leading Chinese investment firm on Monday raised its forecast for China’s economic growth in 2015 to 6.9 percent from 6.8 percent, citing the effect of supportive macro policies.

The economy is expected to expand by 6.8 percent in 2016, up from the forecast of 6.6 percent, and maintain that growth rate in 2017, Xinhua cited China International Capital Corp. (CICC) as saying in a report.

The real GDP growth will likely stabilise in the fourth quarter of this year as a result of strong government commitment towards shoring up the economy, it said.

“China may be able to end its six-year streak of growth deceleration by 2017 with the help of counter-cyclical macro policies and more importantly, some material progress in economic reforms in the next two years,” according to the report.

The CICC expects China to push forward with structural reforms, including those to enhance the competitiveness of state-owned enterprises, cut business taxes, and overhaul the household registration system to give more people access to public services.

The firm forecast a further slowdown of fixed-asset investment and faster expansion of consumption and the service industry in 2016.

Inflation will stay at a low level in the coming two years, allowing the central bank to further reduce benchmark interest rates and the ratio of deposits that banks are required to set aside in 2016, the report said.

To combat a prolonged slowdown in China’s economy, the central bank has cut the benchmark interest rates six times in nearly 11 months and lowered banks’ reserve requirement ratio five times in nearly nine months.

It has also ramped up fiscal spending and reduced taxes, while launching a massive programme that allows local governments to convert their debt to low interest bonds, easing their debt burden without disrupting the broader economy.

Fiscal stimulus will play a greater role in supporting growth in future and the local government debt swap program will continue, the CICC forecast.

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