Date
26 March 2017
China continues to battle excess capacity and needs to move ahead with structural reform, the bank said. Photo: Reuters
China continues to battle excess capacity and needs to move ahead with structural reform, the bank said. Photo: Reuters

ADB sees China growth at 6.5% this year

China is expected to expand 6.5 percent this year and 6.3 percent in 2017, reflecting slowing in the Asia Paific region.

The world’s second largest economy will come in at the bottom of of an official target range for 2016, the Wall Street Journal reports, citing the Asian Development Bank (ADB).

At its annual parliament earlier this month, the government set a target of 6.5 percent to 7 percent growth this year and an average of 6.5 percent in the next five years.

But that level can only be achieved by excessive monetary and fiscal stimulus, according to economists.

Manila-based ADB said it expects the Asian region to post annual growth of 5.7 percent this year and next, down from 5.9 percent in 2015.

“China’s growth moderation and uneven global recovery are weighing down overall growth in Asia,” said ADB economist Wei Shangjin in a report.

China continues to battle excess capacity and needs to move ahead with structural reform, the bank said.

Beijing recently announced plans to reduce by about 10 percent production capacity in the steel and coal sectors over the next five years and set up a fund to help an estimated 1.8 million workers expected to be displaced.

But industry groups say this is unlikely to solve the oversupply problem given that these industries are producing up to 30 percent more than the market needs at present.

ADB said a sharp slowdown in investment in China, particularly in the real-estate sector and other capital intensive industries, will continue to weigh on the economy, although this will be partly offset by further government spending on infrastructure and environment-related investments.

It also said it expects consumption growth to remain robust.

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