China economy to continue slowdown into 2016: World Bank

09:08 PM @ Monday - 06 October, 2014
SINGAPORE (ICIS)--China’s economy is projected to continue slowing down into 2016, with annual expansion hitting below the country’s official target of 7.5% starting this year, the World Bank said on Monday.

The country is the world’s second biggest economy and is the major import market for petrochemicals in Asia.

The country is expected to post average GDP growths of 7.4% this year, 7.2% in 2015 and 7.1% in 2016 – down by 0.2 percentage points, 0.3 and 0.4 from its previous forecasts, respectively, the World Bank said in its East Asia and Pacific Economic Update released on Monday.

Last year, the economy’s expansion stood at a 14-year low of 7.7%.

“In China, growth will gradually moderate …. reflecting intensified policy efforts to address financial vulnerabilities and structural constraints, and place the economy on a more sustainable growth path, the World Bank said.

“Measures to contain local government debt; curb shadow banking; and tackle excess capacity, high energy demand, and high pollution will reduce investment and manufacturing output,” it added.

Manufacturing activities in China showed some stability in September, based on its official Purchasing Managers’ Index (PMI) for the month, which registered a reading of 51.1 – unchanged from August.

A PMI reading above 50 indicates an expansion, while a reading below 50 denotes a contraction in industrial output.

“In China, the authorities need to strike a balance between containing the growing risks from rising leverage and meeting the indicative growth targets,” the World Bank said.

“A focus on structural reforms that can accelerate growth in sectors previously reserved for state enterprises and in services could offset growth-slowing measures needed to maintain stability in local government finances and the financial sector,” the multilateral institution said.

China’s persistent economic weakness has been weighing down on sentiment in Asia’s petrochemical industry.

Chinese markets are currently closed as the country celebrates its National Day on 1-7 October.

Meanwhile, developing east Asian economies, excluding China, are also expected to post a slower average growth of 4.8% this year, from 5.2% in 2013, but should be able to rebound to 5.3% in 2015, according to the World Bank.

Among them, Malaysia is a bright spot as its economic growth is expected to accelerate by a full percentage point to 5.7% this year on the back of robust exports.

The Philippines is expected to post a slower but still robust growth of 6.4% this year from last year’s 7.2%, backed by strong private consumption, supported by strong remittances by its overseas workers, the World Bank said.

Meanwhile, 2014 growths for Indonesia, Vietnam and Thailand are forecast at 5.2%, 5.4% and 1.5%, respectively, the World Bank said.
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