HONG KONG Nov 9 China's economic growth is
likely to slow to 6.5 percent next year and cool further to 6.2
percent in 2017, the OECD said, suggesting that policy makers
will have their work cut out as the Asian giant adjusts to lower
growth from its recent frenetic pace.
In its bi-annual economic outlook report released on Monday,
the Organisation for Economic Co-operation and Development
cautioned that Beijing's fiscal stimulus is not sustainable over
the longer run as it risks crowding out much needed private
"Additional fiscal stimulus would prop up short-term growth
at the cost of increasing imbalances and crowding out private
investment," the report said.
The OECD, which expects China's economy to grow 6.8 percent
this year, also noted that real borrowing costs have continued
to rise amid persistent declines in factory gate prices, which
is squeezing firms' profits and increasing their debt burdens.
The world's second-largest economy grew 6.9 percent in the
third quarter from a year earlier, the weakest pace since the
global financial crisis, hurt partly by cooling investment and
prompting the central bank to cut interest rates for the sixth
time in nearly a year.
Besides the monetary easings, the government has been
ratcheting up fiscal spending to support infrastructure
investment in an effort to put a floor under the slowing
President Xi Jinping has said that China must keep annual
average growth of no less than 6.5 percent in the next five
years to hit the country's goal of doubling 2010 gross domestic
product and per capita income by 2020.
For 2015, the government is targetting economic growth of
around 7 percent, which would be the weakest in a quarter of a
In September, the OECD forecast China's economic growth of
6.7 percent this year and 6.5 percent in 2016.
China's surprise devaluation of the yuan on
August 11, fueled a wave of capital outflows on fears the
economy might be slowing more sharply than thought and on
worries of a possible interest rate rise by the U.S. Federal
The central bank has intervened heavily to keep the yuan
steady after it devalued the currency by nearly 2 percent.
The OECD said recent government measures, including stricter
checks on foreign exchange purchases by firms and individuals
and a crackdown on illegal currency transactions, may have
curbed capital outflows for now.
"Narrowing of the interest differential and slowing growth,
however, may lead to further capital outflows and pressure on
the exchange rate," it said.
(Reporting by Kevin Yao; Editing by Shri Navaratnam)