(Yicai) Nov. 21 -- China’s economic growth is expected to reach 4.5 percent next year if monetary, fiscal, and credit policies remain expansionary, according to the chief China economist at Goldman Sachs.

There is still room for China to ease monetary and fiscal policies next year, Shan Hui said at a media briefing yesterday. But if fiscal efforts are insufficient, there may be risks of lower economic growth, he warned.

In mid-October, Goldman Sachs raised its forecast for China’s gross domestic product growth to 4.9 percent from 4.7 percent this year and to 4.7 percent from 4.3 percent next year. Earlier this year, the Chinese central government set the country’s economic growth target to around 5 percent.

China is expected to cut interest rates by 40 basis points and have a deficit rate of 3.6 percent next year, Shan predicted. If all types of bonds and quasi-fiscal instruments are counted, the fiscal deficit will likely account for 13 percent of the GDP in 2025, compared with 11.2 percent this year.

Inflation will recover but slowly next year, with the producer price index remaining the same and the consumer price index inching up 0.9 percent from this year, Shan pointed out.

Regarding consumption, Shan said China should introduce new boosting policies. Consumption subsidies of CNY100 billion to CNY200 billion (USD13.8 billion and USD27.6 billion) are not enough to stimulate the market, as at least CNY1 trillion (USD138.1 billion) are needed to improve confidence, he explained. 

Other types of subsidies that should be introduced in China in the future are for two-child families and rural pensions, Shan believes.

The main external factor disrupting China’s economy will likely be the United States import tariffs next year, which are expected to increase between 5 percent and 60 percent, for an average of about 20 percent, according to Shan.

As a result, the Chinese yuan will likely depreciate against the US dollar, averaging 7.5 in the next six to 12 months, Goldman Sachs predicted.

In terms of contribution to the GDP, China’s net exports will fall to 0.1 percent from 1.3 percent next year from this year, while domestic demand will rise to 4.4 percent from 3.6 percent, according to a forecast from Goldman Sachs.

The main drag on China’s economy will remain the sluggish property market next year, Shan said.

Editor: Futura Costaglione