The government’s polices to slow rapid credit growth, contain shadow banking and limit borrowing by local governments have led to slower investment growth in areas such as real estate, the report says. To prevent growth from slowing down too much, China also announced a series of limited, targeted stimulus measures, according to the report, a regular assessment of China’s economy.
“In 2015, it remains a priority for China to balance reforms and short-term growth, because large-scale, broad-based stimulus measures aimed at supporting growth may conflict with efforts to make the economy more sustainable in the medium run," saidChorching Goh, Lead Economist for China.
China’s economic structure is slowly changing. On the one hand, economic activity remains constrained by overcapacity in heavy industries, decelerating export growth and regulatory tightening on nontraditional lending. The real estate market remains weak, with excess inventory and, in most cities, softening property prices.
On the other hand, growth in services stayed robust, especially in advanced services such as banking and insurance. And in most recent years, consumption has grown slightly faster than investment.
To keep the economy on the right track, the report recommends, for example, a better allocation of credit, which in turn requires financial sector reforms. The investment-driven growth model helped China’s economy take off, but reforms are needed to enable the financial system to support sectors that can maintain reasonable growth over the medium-term.
