OECD cuts China 2019 GDP outlook amid risks

By BLOOMBERG

BEIJING • China’s growth will likely slow to 6.2% this year and 6% in 2020, as more of the economy shifts toward consumption and services, according to a biennial report by the Organisation for Economic Cooperation and Development (OECD).

OECD estimated 2019 expansion would be 6.3% in an outlook published last year. China faces risks “tilted to the downside”, including large-scale corporate defaults, a collapse of housing prices and rising geopolitical tensions, the OECD wrote in its economic survey on China published yesterday.

Further escalation of trade tensions will take a toll on exports and overall growth, and likely trigger depreciation pressure on the yuan.

Additional stimulus measures will result in stronger growth in the short term, but larger imbalances later.

China should avoid directing credit to state-owned enterprises and local governments as part of the fiscal stimulus, link debt ceilings to government revenues, allow greater yuan exchange-rate flexibility and move its monetary policy framework toward targeting mediumterm inflation.

The country’s exports growth will likely slow to 4.5% and imports growth to 6% this year amid weakening global and domestic demand, according to the OECD.

Data due today was expected to show that the economy stabilised in the first quarter of this year, though a closer look is needed to tell if the improvement is temporary. — Bloomberg