World Bank expects China's economic growth to slow to 6.2 percent in 2019

BEIJING (Reuters) - China’s economic growth is likely to slow to 6.2 percent in 2019 from an expected 6.5 percent this year, as headwinds increase due to its trade dispute with the United States, the World Bank said in a report published on Thursday.

Men work on cables connecting power transmission towers in Zhoushan, Zhejiang province, China October 22, 2018. REUTERS/Stringer

Its outlook on China’s 2018 economic growth, which would be the weakest in 28 years, remained unchanged from its prediction in April.

“Looking ahead, China’s key policy challenge is to manage trade-related headwinds while maintaining efforts to limit financial risks,” the bank said its latest assessment on the world’s second-largest economy.

Consumption will remain the main driver of China’s economy, as weaker credit growth weighs on investment and slowing global demand and higher U.S. tariffs on Chinese shipments take a toll on the country’s exports, the report said.

“To stimulate the economy, fiscal policy could focus on boosting household consumption rather than public infrastructure,” the bank said, adding that China has room to further lower business taxes.

The government has pledged to cut taxes more aggressively next year, spurring a debate among Chinese economists on whether Beijing should expand its fiscal deficit ratio beyond 3 percent next year.

The government has in recent months unveiled a raft of policy measures, including cuts in banks’ reserve requirements to spur lending, tax cuts and steps to fast-track infrastructure projects.

Growth in Asia’s powerhouse economy slowed to 6.5 percent in the third quarter, the weakest pace since the global financial crisis. Indications are that momentum is likely to come off further in the current quarter and next year, with data last week showing surprising softness in November factory output and retail sales.

In October, the International Monetary Fund cut its forecast on China’s 2019 economic growth to 6.2 percent from 6.4 percent while keeping its 2018 outlook unchanged.

The World Bank said that while China continues its trade talks with the United States, it should increase its efforts to address trade partners’ concerns over intellectual property protection and technology transfers.

Reporting by Kevin Yao; Editing by Jacqueline Wong