- China’s GDP growth moderated to 6.5 percent year on year in the third quarter from 6.8 percent in the first half of 2018, mainly due to weaker growth in investment and exports.
- China’s financial markets declined: equity prices lost 20 percent and the renminbi depreciated by 6 percent against the US dollar.
- In response to this challenging economic environment, the government announced a series of measures to support growth and investor confidence: increased liquidity provision by the People’s Bank of China, infrastructure investment, fiscal incentives for households and firms, and additional support to small businesses.
- Despite the slowdown, China’s economy remains resilient. The World Bank projects GDP growth at 6.5 percent in 2018 and 6.2 percent in 2019.
- Given the highly uncertain outlook, stimulus may be needed next year. To boost the economy, China has room to shift government spending toward health, education, and social protection.
- Higher and better targeted social spending would create jobs, enhance public services, and provide better support to vulnerable families. It would encourage households to save less and spend more.