China’s anti-pollution drive will hit economic growth, raise prices, economist says
Beijing likely to tolerate slower expansion for environmental gains and while Xi Jinping’s goals for 2020 remain in sight, analyst says
China’s drive to cut pollution could reduce economic growth by 0.25 percentage points in the next six months while boosting factory inflation, according to Paris-based banking and financial services firm Societe Generale.
Production cuts to curb emissions and tougher nationwide environmental inspections would also support the profits of large industrial companies as producer prices rose, Yao Wei, the company’s chief China economist, said.
The campaign would give a “notable supply shock” to the economy, she said.
“The Chinese government has turned very serious about fighting pollution,” Yao wrote in a note. It would be “more than a transitory objective for the current leadership. Modestly slower growth will be a necessary sacrifice for maintaining social stability over the medium term”.
Authorities have intensified their anti-pollution drive before a twice-a-decade Communist Party Congress set to begin on October 18. The expansion has not yet shown signs of suffering for it, and economists surveyed by Bloomberg forecast a second straight year of 6.7 per cent growth.