AMRO projects the country’s 2020 growth rate to moderate to 5.6 percent from 6.1 percent in 2019, with a sharp but short-lived downturn due to the outbreak of COVID-19. Consequently, while there may be disruption to businesses in the short run, production is expected to recover and bounce back once the outbreak is contained and brought under control. Despite a sharp rise in food prices, inflation rate is expected to remain contained.
Although the impact from trade tensions have moderated with the successful conclusion of Phase One deal with the U.S., the outbreak of COVID-19 has become a challenge. If not contained quickly, it could have a major impact on growth in 2020. Other sources of risks include a global economic slowdown, a re-escalation of trade tensions, and a further increase in corporate debt.
The authorities have stepped up fiscal, monetary and macro-prudential policies to bolster the economy and mitigate the above risks.
In the longer term, economic policies should promote China’s transformation into an innovative and technology-driven economy which is sustainable and environmentally friendly. At the same time, China should further reform the state-owned enterprises to improve their efficiency and profitability.