China EconTalk: UBS expects more policies to stabilize China’s growth

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03:46

In the face of uncertainties globally and economic slowdown at home, chief China economist of UBS, Wang Tao, projects more macro policies this year to boost domestic demands as well as stabilize economic growth.

China's 6.6-percent GDP growth of 2018 achieved official's target. And China is still the largest contributor to global economic growth, accounting for more than 30 percent of global GDP growth, based on Wang.

Meanwhile, she admitted that the country experienced economic decelerating last year. Wang attributed that slowdown to the deleveraging in the first half of the year and weak external demands in the second half.

“In the first half, it was relatively obvious that domestic policy was tightening, especially policies related to deleveraging, controlling local government debt. It has led to weaker infrastructure investment and weaker credit debt growth,” Wang explained.

As to economic performance in the second half of 2018, Wang highlighted the impacts of China-U.S. trade frictions and negative performance of the automobile sector.

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In her opinion, global demand will weaken further while growths in both U.S. and Europe are likely to slow down further. And she is worried that China-U.S. trade tensions are likely to last with negative impact lingering.

“Those kinds of uncertainties will dampen business confidence and investment. It will likely also have negative impact on employment and consumption,” she noted, adding that “another concern is the U.S. will increase export restriction on some of the high-tech products, perhaps also restricting investment from China to those sectors.”

Therefore, the economist predicts a soft-landing economic performance this year and expects more policies coming out to support growth.

“Macro policies are adjusting to support growth. And we expected another at least 200 basis points of triple R. And we expected government to increase fiscal spending, reduce tax further. The combination of polices will help stabilized domestic demand… overall, we are looking for a soft-landing of growth in 2019,” she elaborated.

Wang also shared her observation on the RMB exchange rate with CGTN.

“It's possible that the RMB will actually appreciate against the U.S. dollar. It depends on what the U.S. dollar does. So right now, I think the market expects the Fed to become dovish, even pause. If that's the case and if Europe turns to be better with some uncertainties diminished, we could see the U.S. dollar weakening. And RMB can appreciate,” she suggested.