The Chinese economy is expected to remain resilient this year, and policymakers need to focus on reform and prevention of financial risks to improve the quality of growth, economists said.
China’s year-on-year GDP growth reached 6.9 percent last year, which beat general market expectations, according to data released by the National Bureau of Statistics on Jan 18.
“China’s GDP growth in 2017 indeed surprised us on the upside,” said World Bank Lead Economist for China John Litwack, who attributed the high growth rate to the resurgence in the world economy, which increased demand for China’s exports, and greater business and investor confidence about China.
Nomura Securities said exports and the new economy are the main driving forces. “The upside was mainly driven by information technology and transportation services, which is a sign of strong performance in the internetled new economy.”
But analysts said growth may moderate this year, although it will remain stable and resilient.
“We currently expect somewhat slower growth in 2018 at 6.4 percent,” Litwack told China Daily. “While the world economy is still expanding, we do not expect that same increase in export demand this year.”
UBS, a securities company, said in a report that China’s growth may dip to 6.4 percent this year, citing weakening industrial output, investment and retail sales growth, although it said real estate investment and construction may continue to help shore up the economy.
Nomura Securities believes internet businesses “will likely continue to outperform this year, as China is rebalancing toward the new economy”.
Economists suggested that as growth stabilizes and is no longer on top of the agenda, the country needs to press ahead with necessary reforms to lay a groundwork for high-quality growth in the middle term.
“China’s leadership has properly prioritized the quality of growth over quantity of growth, with the goals of reducing further financial risks, eradicating poverty and improving the environment,” said Litwack of the World Bank.
“China’s biggest challenge is not to achieve stable growth this year, but to ensure that the economy and welfare of the population can continue to grow at an accelerated pace over the medium term,” he added.
He also said China should continue its deleveraging drive to contain financial risks, a move that he said will be important for achieving the goal of sustainable and high-quality growth in the medium term.