MNI EXCLUSIVE: China To Buoy Growth Ahead Of 2021: Economist

--China May Manage 6.5% Growth In 2019, NDRC Economist Says

--Growth A Priority Ahead Of Communist Party Anniversary

     BEIJING(MNI) - China's economy is likely to expand by around 6.5% next

year, despite the trade dispute with the U.S., as the government considers

guaranteeing returns on private investment to sustain growth during the lead-up

to a key anniversary for the Communist Party, an economist associated with the

national economic planning body told MNI.

     Government advisors and former officials have said growth could fall closer

to 6% in 2019 from 6.5% or slightly higher this year, amid headwinds from the

tariffs clash with the U.S. and the effects of a deleveraging campaign. But the

economist, a director at the Macro-economic Research Institute of the National

Development and Reform Commission, said authorities will be keen to maintain

economic momentum ahead of the 100th anniversary of the Chinese Communist Party

in 2021.

     "GDP growth will be at least around 6.5% in 2019, which would not be bad,"

said the NDRC economist, who did not want to be named.

     A deleveraging campaign, which aimed to reduce excess debt accumulated in

the years following the financial crisis, is now paused. But calls from some

advisors for an expanded fiscal deficit have met with resistance, and cuts in

banks' reserve ratio requirements have failed to boost credit to private

businesses, which complain that lenders prefer to deal with state-owned

enterprises.

     --GUARANTEED RETURNS

     The economist said that the government is already working on measures to

guarantee returns for private companies on infrastructure projects, especially

via public-private partnerships.

     This would be a healthier form of stimulus than relying on fiscal spending,

consumption-boosting tax cuts, or by reducing companies' contributions to their

employees' social insurance, the economist said. It would also be more

compatible with the government's objective of rebalancing the economy, and

reining in financial risks while continuing to improve the environment and

reduce the gap between relatively affluent urban areas and poorer regions.

     Stimulus like that following the 2007-08 crisis, which led to a debt binge

by local governments both borrowing directly and via off-balance sheet funding

vehicles, should be avoided, the economist said.

     Investment could concentrate on areas such as inter-city highways and

boosting infrastructure in less developed regions, including projects such as

the Sichuan-Tibet Railway, the NDRC believes. Better roads could help reverse a

recent fall in car sales growth, and regional projects would not only boost GDP

but also contribute to the government's aim of ensuring social stability.

     One potential lever of stimulus likely to be left untouched is that of the

property market, because of the danger of stoking financial risks, the economist

said, noting that even negative property investment growth "doesn't overly merit

concern."

     The government has targeted average growth at above 6.5% for its 13th Five

Year Plan, from 2016-2020, and the economist stressed that officials would not

want to have to rely on a last-minute dash in the final year of this period to

meet this objective. The rate of GDP expansion came in at 6.7% and 6.9% in the

first two years of the plan, respectively, and is expected to be slightly higher

than 6.5% this year -- so growth needs to be around 6.2% in 2019 and 2020 to

meet the target.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

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