China’s 2020 growth could exceed 6 per cent if US trade tensions ease, analysts say

Outlook for China-US trade talks will determine how much above or below 6 per cent China’s 2020 growth will be, experts say

In worst case scenario, where trade war tensions increase, China’s growth rate could slip to as low as 5.3 per cent next year, according to the Morgan Stanley

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China’s registered unemployment rate was 3.6 per cent in the third quarter, down from 3.8 per cent a year earlier. Photo: Xinhua

Published: 8:30am, 20 Nov 2019Updated: 8:30am, 20 Nov 2019

China’s growth next year could reach 6 per cent, or even exceed it, if trade war tensions with the United States de-escalate in the near future, some private sector economists now say.

China’s relatively stable job market, and the support it provides to the outlook for consumer spending, has given Beijing confidence it can take a very deliberate approach to increasing stimulus measures to help economic growth.

This confidence makes it likely that Beijing will set its growth target for 2020 at around 6 per cent, even though many private forecasters are projecting a growth rate next year below 6 per cent in the absence of further significant stimulus, some analysts said.

Liu Xuezhi, a senior researcher with the Bank of Communications, said Chinese growth could come in “around 6 per cent” next year, with the outlook for trade negotiations determining the extent to which growth will be above or below that figure. Growth of 6 per cent remains a relatively high rate compared to other economies and a small deviation from that level “won’t have an obvious impact on peoples’ daily lives,” he added.

Morgan Stanley economists are predicting in their baseline scenario – which assumes China and the US sign their “phase one” trade deal and some tariffs are rolled back – that China’s growth will bottom out at 5.9 per cent in the fourth quarter and experience a modest recovery next year, with full-year average growth rate of 6.0 per cent.

In the worst case scenario – where trade war tensions increase – China’s growth rate could slip to as low as 5.3 per cent next year, according to the Morgan Stanley research led by chief China economist Robin Xing. The best case scenario, marked by further improvement in trade relations, could see growth rise to 6.4 per cent.

Whether consumer confidence recovers will also be vital to the pace of consumer spending, which is a key factor in the growth outlook since it accounted for 60.5 per cent of growth in the first three quarters of this year.