During the last several decades, the Chinese government pushed the economic engines to the max. But the Chinese economy may not grow as fast as scheduled during the next couple of years. Chinese officials are not worried about a potentially smaller growth, as they plan to make the economy more sustainable.
The World Bank cut their forecast of the Chinese economic growth from 7.6 to 7.4 percent for 2014. The Bank estimates that the growth will decline to 7.2 percent in 2015 and to 7.1 percent in 2016. The Beijing government initially targeted a 7.5 percent growth.
“Measures to contain local government debt, curb shadow banking, and tackle excess capacity, high energy demand, and high pollution will reduce investment and manufacturing output,” the World Bank report says.
Sudhir Shetty, World Bank East-Asia and Pacific Chief Economist, claims that the latest report should be understood as carrying the message of “cautious optimisim”. The region’s economy will grow by just 6.9 percent in 2014 and 2015, the lender forecasts. Initially, the bank estimated a 7.1 percent. Along with China, Vietnam, Malaysia and Cambodia have the proper conditions to increase their exports, the report adds.
Malaysia is likely to have better economic results at the end of the year than initially forecast. In April, the World Bank estimated the country’s economic growth at 4.9 percent and now it revised it to 5.7 percent.
The Thai economy is slowing down. While the initial estimates were set at 3 percent annual economic growth, the World Bank now believed that the country will only see a 1.5 percent growth.
The Chinese government plans to structurally adapt the economy. The new policies involve a greater reliance on consumption, as a means of moving away from the dependence on foreign investments and exports. Although China witnessed a construction boom, the housing market is slowing down and the government will have to adopt new fiscal policies.
However, “a major nationwide correction in real estate prices in China remains unlikely, although there may be pressure on prices in several of the less rapidly growing provinces.”
China is the largest economy in the region, so any adopted economic policy will likely influence its neighbors. Mongolia and Indonesia may suffer if China changes its industrial policies, as they are important suppliers of raw materials for the Chinese industry.
The Hong Kong protests may influence the economic growth of the area, but so far there have not been any significant effects, according to the report.