China Economic Growth Seen Slowing Despite Policy Easing

China’s economic growth is expected to slow to 6.5 percent in 2016 from an expected 6.8 percent in 2015, even as the central bank eases policy further to ward off a sharper slowdown, a Reuters poll showed.

A 25-basis-point reduction in benchmark interest rates and another 50 basis points of cuts in banks’ reserve requirement ratio (RRR) are expected by year-end, analysts surveyed by Reuters said.

In a bid to stoke activity, the central bank already has cut lending rates five times since November to 4.60 percent, and lowered the amount of cash that the biggest banks must hold as reserves to 18.0 percent.

But some analysts believe such policy moves have not been as effective as in the past when the economy was more tightly controlled and debt levels were much lower.

The central bank is expected to cut reserve requirements by a further 150 bps in 2016 but keep interest rates unchanged, the poll showed.

The world’s second-largest economy is forecast to grow 6.8 percent this year, cooling from 7.3 percent in 2014 and the slowest pace in a quarter of a century, according to the median forecast of 62 analysts.

Growth is expected to slow further to 6.5 percent in 2016.

The forecasts are lower than a previous poll in July, when analysts thought the economy would grow 7 percent in 2015 – in line with the government’s target – and 6.7 percent in 2016.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam