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Growth is set to soften somewhat in 2018-19, as exports ease and investment slows. The current account surplus is projected to stabilise. Infrastructure investment, a major growth driver in recent years, is projected to slow further amid tightening monetary conditions and a more rigorous approval process for local government investment.
The monetary policy stance will remain neutral with a tightening bias, as mitigating financial risks has appropriately become a key policy priority. Shadow banking activities are increasingly being reined in and credit growth is slowing, while capital outflows moderated in early 2018 following a surge and the exchange rate has stabilised. Fiscal policy will remain supportive, but less so than in recent years as unauthorised local government investment is subject to increased scrutiny, which will strengthen fiscal sustainability. A series of new tax cuts have been announced, but the headline fiscal deficit will be kept under control by streamlining government organisations to contain public spending. Imminent risks stemming from trade frictions have receded, but the large number of unresolved issues will keep tensions high.
Economic Survey of China (survey page)