Limited room for China to tighten policy
China’s leadership is signalling growth will slow slightly in 2017, policy advisers say, as it struggles to strike a balance between supporting the economy with loose credit conditions and preventing a destabilising build-up in debt.
That means the interest rate easing cycle that began in November 2014 is probably over, they say, particularly as investors are drawn to higher US interest rates and move money out of emerging markets including China.
China’s economic growth is likely to be around 6.5 per cent next year, several sources said, the minimum needed until 2020 to meet goals of doubling GDP and per capita income from 2010 levels. This year’s target is growth of 6.5 to 7 per cent.
The challenge is how to tighten credit to contain debt, speculative investment and outflows without triggering defaults and company failures, said the sources, who are involved in internal policy discussions and offer advice to policymakers but are not part of the final decision-making process.