Further slowdown in GDP expansion forecast in 2015

Economic growth in China is expected to post the slowest growth rate since 1990 of around 7.2 percent in 2015, State-owned lender Bank of China Ltd said on Tuesday.

"We expect that the government will set its annual economic growth target for 2015 at around 7 percent, down 0.5 percentage point from 2014," said Gao Yuwei, a researcher at the bank's Institute of International Finance.

Cao Yuanzheng, chief economist of BOC, said China's economic structure has been undergoing profound changes in recent years. The service industry has become the largest industrial sector and consumption has become a major contributor to the economy, significantly alleviating the employment pressure.

"Back in 2007, every percentage point of GDP growth would have created 1.2 million jobs. But now, it will create 1.8 to 1.9 million jobs ... In this sense, economic growth is not as important as before," Cao said.

According to a report on the economic and financial out look in 2015 released by the lender, the service industry will account for about 48 percent of the gross domestic product, giving more support to steady growth of the economy and employment. Consumption is expected to contribute 50 percent of the economic growth.

Consumer Price Index growth will remain low due to the economic downturn, slowdown in domestic demand and over capacity. The bank estimated that the CPI will grow 2.4 percent in 2015, up 0.4 percent age point from this year.

With the economy slowing down and inflation staying at a low level, economists expect M2, or the broad measure of money supply, to grow 12.5 percent next year, slower than the growth rate of around 13 percent this year.

With China broadly expected to lower its growth target for 2015 and continue economic restructuring, new yuan loans would reach about 9 trillion yuan ($1.46 trillion) in 2015, the report said.

Zhou Jingtong, a senior economist at BOC, said: "With low economic growth and low inflation, China will continue to implement a prudent monetary policy while loosening it to some extent.

"Whether the central bank will cut interest rates further depends on whether the recent cut in benchmark interest rates and monetary policy tools employed by the central bank earlier this year will effectively reduce financing costs for the real economy."

The report said China "is very likely to cut the benchmark interest rates again in 2015" and "lower banks' reserve requirement ratio further once or twice".

Economists expect the central bank to continue using and innovating monetary policy tools as well as taking targeted measures to fine-tune the economy.

On Nov 22, the central bank cut the one-year benchmark lending rate by 40 basis points to 5.6 percent and the one-year benchmark deposit rate by 25 bps to 2.75 percent. Other benchmark deposit and lending rates were lowered accordingly.

jiangxueqing@chinadaily.com.cn