China is expected to post its weakest economic growth since the global financial crisis in the fourth quarter, adding pressure on policymakers to take more steps to ward off a sharper slowdown that could jolt global markets.
A renewed plunge in China’s stock markets and the yuan CNY=CFXS have stoked concerns among global investors about the health of the world’s second-biggest economy, although analysts see few signs of an abrupt drop-off in activity.
Growth in fourth-quarter gross domestic product likely slowed to 6.8 percent from the same period last year, down from 6.9 percent in the third quarter, according to a Reuters poll of 50 economists.
That would be the weakest pace of expansion since the first quarter of 2009, when growth tumbled to 6.2 percent.
The highest forecast in the poll was 7.1 percent and the lowest was 5.3 percent, though some investors fear current growth levels could already be much weaker than the official data will suggest.
“The weaknesses in both domestic and external demand have exacerbated the deflationary pressures in the economy,” economists Qu Hongbin and Julia Wang at HSBC said in a note.
“Going into 2016, weak domestic as well as external demand will continue to weigh on growth.”
Economic growth for the full year is expected to have cooled to its slowest pace in 25 years of 6.9 percent in 2015 from 7.3 percent in 2014, a central bank work paper said recently.
Beijing’s growth target for 2015 was “around” 7 percent, with the government rejecting suggestions that the figures were being inflated to meet official forecasts.
FISCAL STIMULUS EYED
While the government is expected to lean more on fiscal policy to support growth this year, the central bank may still need to keep monetary policy accommodative to help cushion the impact of structural reforms on the economy.
Top leaders also pledged to push forward “supply-side reform” to help generate new growth engines, while tackling factory overcapacity and property inventories.
The government could widen this year’s budget deficit to about 3 percent, the biggest in perhaps half a century, as leaders turn to tax cuts and increased spending to support growth, policy advisers say, after disappointing returns from a year of monetary policy easing.