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Economic growth is projected to hold up in 2017 and 2018, partly thanks to the impact of earlier fiscal and monetary stimulus. Infrastructure investment is picking up on the back of regional development initiatives, including the Belt and Road and the Beijing-Hebei-Tianjin Corridor. Real estate investment will remain buoyant notwithstanding measures to restrict demand. Private investment growth has bottomed out and consumption growth will remain stable, underpinned by continued strong job creation. Recovering global demand will spur exports, but surging tourism imports will limit the effect on the current account balance.
In a context of low inflation, monetary policy is appropriately geared to focus on financial risks, which have mounted. Fiscal policy will remain supportive but should prioritise social inclusion more. Productivity-enhancing reforms, such as further reducing the costs of doing business, phasing out the implicit guarantees enjoyed by state-owned enterprises and improving corporate governance frameworks, are necessary to keep up the pace of convergence in income per capita to the advanced economies.
Integration into global value chains was instrumental in China's spectacular economic growth in recent decades. Moving to higher value-added production calls for improvements in the quality and relevance of innovation and, as lower-skilled jobs move to lower-cost countries in the region, for upskilling.
Economic Survey of China (survey page)