China’s growth outlook cut by World Bank as US trade war continues to weigh on economy

The Washington-based World Bank cuts China’s 2019 gross domestic product forecast to 6.1 per cent, just above the bottom-end of the government’s target range

China’s headline growth forecast for next year is also cut by 0.3 percentage points to 5.9 per cent, with the World Bank predicting a drop to 5.8 per cent in 2021

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The publication of the World Bank’s new forecasts came as a top-level Chinese delegation led by Vice-Premier Liu He is due to meet their American counterparts later on Thursday in Washington for a new round of talks in hopes of easing trade tensions. Photo: Bloomberg

Published: 3:15pm, 10 Oct 2019Updated: 10:09pm, 10 Oct 2019

The World Bank has joined the parade of international organisations and market institutions cutting their forecasts for China’s growth rates for 2019 and 2020 as trade tensions with the United States show no signs of abating and threaten to spill into the finance, technology and even entertainment sectors.

The Washington-based agency on Thursday cut China’s 2019 economic growth forecast to 6.1 per cent, down 0.1 percentage point from its previous estimate in April, reflecting rising structural constraints and “less benign external conditions”. The new growth forecast is just above the bottom-end of the Chinese government’s growth target range of 6 to 6.5 per cent for this year.

It also slashed the headline growth forecast for next year by 0.3 percentage points to 5.9 per cent as a result of ripple effects. The initial forecast for Chinese growth in 2021 projects the economy to slow slightly further to 5.8 per cent.

The World Bank also cut its growth forecasts for nearly all Asian and Pacific economies this year, including a cut of 1.1 percentage points for Thailand and a 0.6 percentage point reduction for Philippines as trade tensions and global uncertainties have intensified.

Downside risks to the [economic] outlook are high, stemming from a further escalation of China-US trade tensions and a weaker than expected global outlook,

World Bank report

“Downside risks to the [economic] outlook are high, stemming from a further escalation of China-US trade tensions and a weaker than expected global outlook,” the World Bank said in its report.

While the direct economic impact of the trade war is expected to be manageable, the indirect effects on consumer and business confidence could be larger than currently expected, it warned.

“A protracted period of high uncertainty and continuing deterioration in China’s access to foreign markets could lead to a shift of global value chains to other countries and a much more significant and longer-term adverse impact on investment,” the World Bank added.