China's downside risks for the next six months are increasing, and maintaining exchange rate stability is crucial in the three macroeconomic management methods of finance, exchange rate and currency, so the government is expected to maintain strict capital controls, the bank said Tuesday. The bank also predicts that the renminbi will fall to 7.0 against the dollar at the end of this year and will rise slightly to 7.1 by the end of the year after further drops to 7.2 in the second quarter of next year.
The bank predicts that China's GDP growth will be 6.6% this year, and it will slow down to 6.2% next year.
The negative impact of the Sino-US trade war on the mainland economy has not yet emerged, but the export figures for the fourth quarter are expected to begin to reflect, said Liang Zhaoji, chief China economist at the Economic Research Department of the Star Development Bank (Hong Kong). As for consumption growth, it is still healthy, but investment and industrial production are slowing down.
"Now we have to wait for fiscal policy to support infrastructure, and before that, the economy will still be slowing down." Liang Zhaoji said.
He said that there is some pressure on China's economic fundamentals, but at the same time the Chinese government is expected to try to maintain the stability of the RMB exchange rate, although there is a contradiction between the two, but this contradiction will continue in the short term.
Liang pointed out that China's foreign exchange reserves decreased by $1 trillion in 15-18 months during the period of 2015/16. There was no trade war and there was no shortage of US dollars in emerging markets. At that time, US interest rates were not at the current level, but the depreciation of the renminbi caused a large loss of foreign exchange reserves.
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