Growth decelerated in 2014 in the People’s Republic of China as investment slowed, particularly in real estate. The government targets the growth rate of 7.0% as “new normal.” Inflation will remain low. The surplus in the current account will expand in 2015 but moderate in 2016. The main policy challenge is to reform local government finance to reduce debt and improve transparency without hindering growth.
|Selected economic indicators (%) – People’s Republic of China||2015||2016|
|Current Account Balance (share of GDP)||2.3||2.0|
Source: ADB estimates.
As the pace of investment slowed, growth in the gross domestic product (GDP) in the People's Republic China (PRC) continued to decelerate, falling from 7.7% year on year in 2013 to 7.4% in 2014. Growth still met the government target of about 7.5%. As in 2013, the government provided fiscal and monetary support to ensure stability in labor and financial markets but refrained from large-scale stimulus. It thus embraced more closely the new normal of decelerating growth as demographic shifts and the sheer size of the economy make sustaining the high growth rates of the past increasingly difficult.
Further moderate deceleration is forecast for GDP growth, to 7.2% in 2015 in line with the government target of about 7.0%, and 7.0% in 2016, before the rate stabilizes or rises again. The forecast reflects recent trends and recognizes that the government’s emphasis on high-quality growth and its ongoing gradual structural reform will likely moderate growth in the next 2 years. Growth in 2015 will benefit from lower commodity prices, which will bolster domestic consumption and invigorate global demand for PRC exports. Commodity price recovery in 2016 is, however, forecast to have the opposite effect and push GDP growth lower.
Excerpted from the Asian Development Outlook 2015.