(Bloomberg) -- China’s economic growth will come in at 5.9% in 2020 as easing trade tensions and the prospect of lower bank borrowing costs boost confidence, according to analysts and traders.
That’s an upgrade from the previous forecast of 5.8% from November, before the U.S. and China agreed a ‘Phase One’ dealt to lower tariffs and boost agricultural trade between the two nations. The economy will grow by 6.1% this year and by 5.8% in 2021, according to the median estimate of around 70 economists in a Bloomberg survey.
Observers see policy makers maintaining a measured pace of easing into next year, trimming the price of central bank medium-term lending by 15 basis points with the first cut coming in the first quarter, according to results combining the economists survey and a separate survey of market analysts and traders.
Meanwhile, the amount of cash banks have to put aside as reserves will continue to be lowered, possibly by 50 basis points in the first quarter and another 50 basis points in the remainder of the year, according to the survey.
The latest results suggest sentiment on China’s outlook has started to turn around, boosted by better-than-expected output data in November.
“With the announcement of a trade deal, we now have greater conviction that the Chinese economy is on a mini-cycle recovery path in 2020,” Robin Xing, chief China economist at Morgan Stanley (NYSE:MS) Asia in Hong Kong, wrote in a note. Policy makers will continue with “defensive easing,” and monetary policy will remain accommodative to facilitate fiscal easing, he said.
Other survey results include:
- The 10-year sovereign bond yield likely won’t drop below 3% in 2020. The median estimate of the yield stands at 3.2% by the end of the first quarter, and 3.05% by year-end
Still, a firm recovery of the overall economy is not yet consensus, particularly as private companies still struggle to find cheap funding.
“Next year will be a transition year for the economy to shift to good from bad, and there’ll be contradictions in macro and micro economic data,” said Meng Xiangjuan, analyst at SWS Research Co. “Market views on next year’s economy will also be divided.”