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China’s economic growth will ease further next year due to slowing exports and US trade tensions, the Asian Development Bank warned on Wednesday as it revised downwards its GDP predictions.
The bank is now forecasting 6.2% growth in 2019 and 6.0% in 2020, a downgrade on its April predictions.
“Domestic consumption will be the main driver of growth going forward with the main downside risk stemming from a potential intensification of the trade conflict with the US,” said ADB chief economist Yasuyuki Sawada at the launch of the latest outlook report.
More supportive monetary and fiscal support was likely from the government in the coming years, the ADB said.
Earlier this month the State Council, China’s cabinet, announced a total of 2.15 trillion yuan ($302 billion) of new special bond issues to be issued by local governments by the end of September.
“We expect to see continued fiscal policy support into 2020,” ADB senior economist Jian Zhuang said.
The government will increase the use of local government special bonds to push up infrastructure investment, predicted ADB economists, who also warned that containing debt would become more challenging over time given that local governments have high spending needs but a weak revenue base.
The bank has also revised up its inflation predictions to 2.6% from 1.9% for 2019 – largely due to heavy increases in pork prices as the country battles the African swine fever outbreak that has seen more than a million pigs culled.
Merchandise export growth plummeted from 12.0% in the first half of 2018 to a bare 0.4% this year, the ADB said.
Exports to the US have fallen nearly 10%, amid a bruising trade war that has seen tariffs slapped on billions of dollars in two-way trade.
Earlier this month, China’s central bank slashed reserve requirement ratios for banks – freeing up about $126 billion to boost lending to mostly small and medium enterprises.
But central bank governor Yi Gang said on Tuesday that there was no pressing need for big policy easing steps or to further cut the amount of cash lenders must keep in reserve to release more money into the stuttering economy.