By Xie Jun, Global Times
China should roll out more fiscal and monetary policies to minimize the negative impact of the escalating trade war with the US on its domestic economy, experts said on Tuesday.
The comments come after the International Monetary Fund (IMF) just downgraded China’s GDP forecast for 2019, citing the ongoing trade row as a major drag on the economy.
The IMF has estimated China’s economy is expected to grow 6.2 percent in 2019 in a World Economic Outlook report it released on Tuesday. This projection is 0.2 percentage points lower than the IMF’s April outlook for the Chinese economy.
Maurice Obstfeld, Economic Counsellor and Director of the IMF Research Department, stressed during an IMF press conference on Tuesday that the trade dispute China is currently having with the US will negatively impact the country’s GDP growth next year, although such a negative influence will be offset by Chinese authorities’ efforts to stabilize the economy.
The IMF forecasted that China’s GDP growth will be 6.6 percent this year, the same forecast in April.
Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Tuesday that the trade war will have an “evident” impact on the domestic economy.
“It is likely to drag back the mainland GDP by 0.1 to 0.2 percentage point for this year and next year. And if the trade disputes worsen, the drag will widen to 0.4 percent to 0.5 percent,” Liu said.
Huo Jianguo, vice chairman of the MOFCOM’s China Society for WTO Studies, told the Global Times on Tuesday that the trade disputes have been a blow to not only the Chinese economy but also the global economy which is in the middle of a recovery.
“China’s economic data in the recent two months also showed a downward pressure – that’s why the IMF has marked down their forecast for China’s GDP,” he said.
But experts said the Chinese government has the capacity to minimize such impact with the launch of more stimulus policies, especially policies to boost domestic consumption.
The People’s Bank of China announced on Sunday to cut the reserve requirement ratio (RRR) by one percentage point from October 15.
“It’s possible that the PBC will launch more RRR cuts before the end of this year,” Liu said.
Lin Guijun, executive dean of the Academy of China Open Economy Studies under the University of International Business and Economics, said that the government should also launch stimulus policies to boost infrastructure construction, particularly in rural areas.
“If we do nothing about the trade war, then surely it will hurt the domestic economy a lot – that’s why the government should boost domestic demands and open new markets to offset negative impact from the trade disputes,” Lin noted.