CICC cuts China’s 2016 growth outlook on weak recovery in global growth

China International Capital Corp (CICC), one of China’s leading investment banking firms, cut its projection for the country’s 2016 economic growth to 6.7 percent from its earlier forecast of 6.9 percent. According CICC, weaker than anticipated rebound in global demand will drag down the Chinese economic growth in 2016.

In its research note, the CICC mentioned that China’s consumption demand is likely to be quite stable, while government investment might keep on recording firmer growth as compared to the private sector. Moreover, political uncertainties in the U.S. and Europe are likely to keep demand for export subdued in H2 2016.

Meanwhile, the CICC has kept its consumer inflation projection unchanged for 2016 at 1.9 percent. The consumer price index is likely to move downwards in the coming few months and then recover moderately by the end of 2016.

"We maintain our forecast of no more interest rate cuts in 2016, and we reduce our reserve requirement ratio cut forecast from four more cuts to one more cut over the rest of the year”, said CICC in its research note.

Meanwhile, China’s fiscal policy is likely to ease further after the Finance Ministry increased attempts in easing fiscal policy and lowered the corporate sector’s tax burden. The Ministry of Finance has stirred to support effective use of fiscal deposits, augment local government bond swaps and bond issuance, and reduce the effective tax burden of firms through value added tax reform and reduced social security contributions. In the first quarter of 2016, the Chinese economy expanded 6.7 percent year-on-year as compared with 6.8 percent growth recorded in Q4 2015.

Meanwhile, on September 3-4, almost 1000 business leaders of G20 members will meet in China in order to talk about promoting strong, balanced and sustainable global economic growth. This summit will have on its agenda the issues of trade and investment, financing growth, employment, infrastructure, anti-corruption and SME development.