China’s economy is expected to grow by 6.2 percent this year and by 6.1 percent next year, despite rising global uncertainties, the World Bank said on May 31.
The world’s second-largest economy has remained resilient, although new trade tariffs have taken effect and global growth slowed, the multilateral lending organization said.
“China’s economy will need to rely increasingly on domestic demand to sustain rapid growth,” it said in the May edition of the China Economic Update.
China’s growth in the first quarter was stronger than expected, and the growth momentum increased in March. Another positive factor to support the projection at 6.2 percent for this year is the government’s strong fiscal stimulus package, according to John Litwack, the World Bank’s lead economist for China.
“Next year, the escalation of trade tensions would not only affect China, but also the rest of the world. Partly because the prospects for world economic growth look lower than before,” Litwack said in an interview with China Daily.
Although the direct impact on trade will be measurable and manageable, the impact on investor sentiment is difficult to gauge, and will depend on the degree to which the trade tensions are expected to be temporary as opposed to a longer duration, the economist said.
The renewed trade tensions have increased fluctuations in the foreign exchange market. Some investors speculated that the Chinese currency is under pressure, and the yuan’s exchange rate against the US dollar may slip to around 7－an important psychological threshold for stabilizing market sentiment.
“The exchange rate policy in China is more transparent than it used to be,” said Litwack. “The main trends in the yuan exchange is mainly determined by economic fundamentals, but it can also be influenced by short-term speculative factors. The Chinese central bank has done well in smoothing volatility from speculative factors while allowing the market forces to determine the currency value.”