OECD warns of downside risks for mainland China economic growth

The mainland’s economic growth will remain “moderate” over the next two years, but faces risks on the downside, while a sharper than projected slowdown would have global spillovers, the Organisation for Economic Co-operation and Development (OECD) warned in its 2015 economic survey of China.

Economic growth was expected to slow to the official target of around 7 per cent this year and slow further to 6.9 per cent next year, the OECD said.

However, it warned that “investment might slow down more than foreseen, for example if stimulus measures fail to counterbalance the effects of the property market correction, shrinking excess capacity and the anti-corruption campaign”.

Other risks mentioned in the OECD’s fourth economic survey of China included unexpectedly cooling consumption as housing spending eases, a stronger US dollar that might hurt Chinese exports, and potential disorderly defaults among corporate issuers, especially in sectors with excess capacity, or of trust products and local government investment vehicles.

In its third survey, rolled out in March 2013, the OECD forecast the mainland’s economic growth would reach 8.9 per cent in 2014, which turned out to be too high as gross domestic product grew only 7.4 per cent last year, the least in 24 years.

The slowdown, the OECD said, “has partly reflected the lagged impact of earlier measures to restrain credit and the housing market boom”.

“It may also signal a more deep-seated deceleration following an exceptionally long spell of very rapid growth”, it said.