MNI INTERVIEW: China 2019 GDP Growth Seen Easing To 6.2%-6.3%

By Iris Ouyang

     BEIJING (MNI) - Chinese economic growth should ease to about 6.2% to 6.3%

in 2019, from around 6.5% last year, an economist at a think tank managed by the

government's economic planning body told MNI, adding that he expected further

monetary easing from the People's Bank of China.

     "The GDP growth rate in Q4 2018 is likely to be 6.3%, and around 6.2% to

6.3% in 2019," said Zhang Yongjun, deputy chief economist at the China Centre

for International Economic Exchange. Zhang, who previously worked on

macro-economic analysis and forecasts for the State Information Centre, said

slowing economic data reflected the strains of a trade war with the U.S.

     Both the official and Caixin manufacturing purchasing manager's indices for

December slowed below the neutral 50-mark dividing expansion from contraction.

November industrial profits dropped for the first time in almost three years,

and industrial output rose less than expected. Retail sales, a major economic

driver in recent years, decelerated in November to the weakest growth since May

2003.

     "The biggest concern is that exports and imports could see a relatively

pronounced slowdown," Zhang said, adding that investment could also slow. The

rate of expansion in fixed-asset investment rose to 5.9% in November from 5.7%

in October, but remained close to the lowest level in a decade.

     --GROWTH TARGET

     Zhang spoke to MNI before the PBOC on Friday announced a 100-basis-point

reduction in banks' reserve requirement ratios by Jan. 25. Also on Friday,

Premier Li Keqiang said he foresaw further reductions in taxes and fees,

broad-based and targeted RRR cuts, and financing support for private and small-

and micro-sized businesses.

     Official measures to arrest the slowdown and boost consumption have so far

included cutting import tariffs, and taxes for companies and individuals, and

lowering barriers to entry to service industry segments.

     Nonetheless, the government is likely to lower its growth target from last

year's "around 6.5%", despite its goal of maintaining a rate of expansion of at

least 6.5% from 2016-2020, Zhang noted.

     In late December, the Chinese Academy of Social Sciences, a government

think tank, predicted 6.3% growth for 2019 and around 6.6% for 2018.

     --FURTHER MONETARY EASING

     Zhang said the PBOC is likely to further loosen monetary policy, moving

beyond targeting specific economic sectors.

     "Even though the PBOC is leaning to targeted measures, I think there could

be more broad-based reductions of reserve requirement ratios for most financial

institutions," Zhang told MNI

     While the government's fiscal deficit is set to increase from last year's

targetted 2.6% of GDP, after both the Central Work Economic Conference and the

National Fiscal Work Meeting in December pledged further large-scale tax cuts

and increased fiscal spending, Zhang argued that the government should keep the

shortfall within its preferred 3% ceiling.

     "Breaking 3% would add to debt, and store up higher payments for the

future," he said, weighing in a debate which has seen some advisors call for a

higher deficit to support growth.

     Keeping the deficit below 3% of GDP would also preserve some fiscal leeway

were the economy to deteriorate further, he argued.

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

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

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