© Reuters. OECD Cuts China 2019 GDP Outlook Amid Risks From Debt, Housing

(Bloomberg) — China’s growth will likely slow to 6.2 percent this year and 6 percent in 2020, as more of the economy shifts toward consumption and services, according to a biennial report by the Organization for Economic Co-operation and Development.

  • OECD estimated 2019 expansion would be 6.3 percent in an outlook published last year.

Key Insights

  • China faces risks “tilted to the downside,” including large-scale corporate defaults, a collapse of housing prices and rising geopolitical tensions, the OECD wrote in its economic survey on China published Tuesday
    • Further escalation of trade tensions will take a toll on exports and overall growth, and likely trigger depreciation pressure on the yuan
    • Additional stimulus measures will result in stronger growth in the short term but larger imbalances later
  • China should avoid directing credit to state-owned enterprises and local governments as part of the fiscal stimulus, link debt ceilings to government revenues, allow greater yuan exchange rate flexibility and move its monetary policy framework toward targeting medium-term inflation
  • The country’s exports growth will likely slow to 4.5 percent and imports growth to 6 percent this year amid weakening global and domestic demand, according to the organization

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  • IMF warned of potential downside risks from China-U.S. trade deal
  • Data due on Wednesday will probably show the economy stabilized in the first quarter of this year, though a closer look is needed to tell if the improvement is temporary

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Sharon Chen

©2019 Bloomberg L.P.

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