China's 2016 Growth May Slow to 6.6 Percent, State Academy Says

  • Chinese Academy of Social Sciences sees 'slow bull' in stocks
  • PBOC should keep monetary policy 'structurally loose'

China’s economic growth will slow next year to between 6.6 and 6.8 percent and the central bank should continue to apply “structurally loose” monetary policy, according to the country’s top government-backed research organization.

The Chinese Academy of Social Sciences forecast consumer-price inflation would accelerate to 2.1 percent next year, a level last seen in mid-2014, while factory-gate deflation would extend its record stretch to more than four years, according to a statement released at a briefing Wednesday in Beijing. The think tank last year projected 2015 growth of 7 percent, then cut the estimate to 6.9 percent in the middle of this year.

Challenges are mounting for the Communist Party as it moves to an economy based more on services and less on infrastructure investment and exports. President Xi Jinping said gross domestic product gains in the next five years should average at least 6.5 percent per year. Economists surveyed by Bloomberg see expansion slowing to 6.5 percent next year and see the deceleration continuing until at least 2018.

"This is very close to what the government would like to see," said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. "They’ve already made it clear that 6.5 percent is the minimum growth they will accept, and they’ll build some buffer."

The CASS researchers predicted a “slow bull” market for the nation’s benchmark equity gauge, with the Shanghai Composite Index fluctuating between 3,200 and 4,000. Shares have advanced 8.7 percent this year through Wednesday’s close at 3,516.19 after soaring as much as 60 percent then plunging from the peak in June.

The CASS report also called for increasing the yuan’s exchange-rate flexibility and introducing a broader target range for the currency, also known as the renminbi.

Property prices will become a “growth stabilizer” as real estate investment rebounds, the researchers said in their annual report. The research group also said the government should expand the fiscal deficit next year while avoiding large-scale stimulus, and that 2016 tax revenue growth will be slower than the economic expansion.

Earlier Wednesday, Wang Baoan, head of the National Bureau of Statistics, wrote in an article published by the official Xinhua News Agency that the world’s second-largest economy faces challenges from falling potential growth and other structural problems.

— With assistance by Xiaoqing Pi, and Kevin Hamlin

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