Vanguard senior economist talks about expectations for China


Our senior economist for Asia, Qian Wang, discusses factors behind China’s slower growth and how policy uncertainty and concerns about a hard landing may affect the markets in the coming year.

TRANSCRIPTVanguard Perspectives® Noni Robinson: Qian, as China’s growth continues to decelerate, naturally, we’re getting a lot of questions from clients and hearing a lot of concern. Can you talk about what the outlook is over the coming year and how that will affect global economies?

Qian Wang
Qian Wang
Qian Wang: Yes, we expect the Chinese economy to continue [to] slow down, and this is probably the biggest downside risk to our global economic outlook. In 2016, we expect the GDP growth [to] come down to 6.5% and the number could go down to 5% by [the] end of 2020. However, I think the slowdown of the economy is not that surprising to the market. That’s well-expected. After all, China has built so much excess capacity and they need to adjust for that. And, also, there’re all kinds of structural factors such as aging of the population, [and] fading of the catching-up effect, that will weigh on the trend growth. I think the real risk for China comes from the policy front. The rising policy volatility, ever since last year, has made the market skeptical about whether the Chinese government can really engineer a soft landing, [and] at the same time, rebalance the economy and keep the financial risk in control. That is a tough job. So I think, even though our baseline scenario is for China to have a gradual and protracted slowdown, given this kind of rising policy volatility and also the fragile and the weak confidence in the market, I think there will be constantly scares [that] China [may] get into a hard landing or even a recession.

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