China’s economic growth will moderate in the next two years as policies to reduce leverage gradually take hold, according to the World Bank.
Growth in the world’s second largest economy will slow to 6.4 percent in 2018 and 6.3 percent in 2019 from 6.8 percent this year, the organization said in a quarterly report. The nation is also making progress this year in its economic re-balancing, as investment’s contribution to output growth declined amid the rising importance of consumption, according to the bank.
Stronger inflation, recovering global trade and resilient domestic demand have boosted China’s expansion, putting it on track to deliver its first full-year acceleration since 2010. Slower investment and easing factory inflation will test the government’s determination to maintain tightened financial regulation and slower money supply growth into 2018.
“Prudent monetary policy, stricter financial sector regulation, and the government’s continuing efforts to restructure the economy and to rein in the pace of leveraging are expected to contribute to the growth moderation,” the bank said. “Favorable economic conditions make this a particularly opportune time to further reduce macroeconomic vulnerabilities.”
The still rising leverage of the non-financial sector and uncertainty related to property prices may damp the economic expansion outlook further, the bank said. Bloomberg
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