MNI POLICY: China 2020 GDP Growth May Slow to 5.8%: Advisor

     BEIJING (MNI) - China is likely to tolerate a slower growth rate next year

after it revised up its performance in 2018, reaching its goal of becoming a

"moderately prosperous society by 2020" without significant pressure, said Li

Yang, the chairman of the National Institution for Finance & Development, a

government-recognized think tank. 

     "The Bureau of Statistics revised some key indicators, so we have realized

our 'moderately prosperous society' goal smoothly," Li said Friday at the China

Finance Annual Forum 2019 & Financial Market Meeting in Beijing. "While people

widely believe growth next year will fall below 6%, we forecast 5.8%," he said.

     On Nov 22, the National Bureau of Statistics restated the nation's 2018

gross domestic output at CNY91.9 trillion, 2.1% more than the preliminary

figure, following its Fourth Economic Census. 

     --PRESSURE OFF 

     The revisions carry meanings, Li said. Aside of being reasonable, they

allow further economic growth to be free from pressure, which "always makes

people do silly things, and we shouldn't be doing that," Li said. 

     Growth, which Li forecast to be 6.1% this year, may likely slow even

further in 2021 after 5.8% next year, as "downward trend is unquestionable," Li

said without giving a specific number.  

     Other points made by Li include:

     - The People's Bank of China may use monetary tools to address weak PPI.

Policies won't be able to address pork shortage, which fuelled consumer price

gains.

     - The fiscal deficit may exceed target this year as the quota has been used

up in the first three quarters. Some local governments have seen little fiscal

revenue growth. 

     - As capital output and investment are both slowing, China is likely to

face economic stagnation, similar to what Japan endured for 20 years.  

     - The rapidly rising debt of local governments should be a concern.

Household debt cannot rise further as its growing trend mirrors the period

before the U.S. subprime crisis. 

     - Deleveraging should not precede growth. That the leverage ratio in

non-financial sector has stabilized or fallen may indicate slowing investment

therefore not a positive sign. 

     - China still has a large potential for increasing investment, such as

enhancing technology and equipment upgrade. China should expand the issuance of

its special-purpose local government bonds. 

     - China-U.S. conflicts will last through the long term, causing

globalization to regress.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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