China's economy will continue to grow above 6 percent this year and next in line with the Chinese government's growth target of 6 to 6.5 percent, the Asian Development Bank (ADB) said in a report released on Wednesday.
The latest Asian Development Outlook (ADO) 2019, ADB's flagship economic publication, said China's economy is forecast to grow 6.3 percent in 2019 and 6.1 percent in 2020.
China's economy "remains strong despite the growth slowdown in recent years," said ADB Chief Economist Yasuyuki Sawada, adding that favorable fiscal reforms at the start of the year, particularly on personal income tax and social security, will help alleviate the adverse effects of anticipated weaker wage growth and boost domestic consumption.
China saw growth slowing from 6.8 percent in 2017 to 6.6 percent in 2018, in line with the government's growth target of around 6.5 percent, the ADO noted.
On the demand side, it said consumption confirmed its role as the main driver of growth by contributing 5.0 percentage points, up from 3.9 points in 2017.
The Chinese government reinforced its support for private consumption when it introduced personal income tax reform comprising new tax brackets and a higher standard allowance effective on October 1, 2018, with more specific additional deductions effective on January 1, 2019.
On the supply side, the ADO said services remained the main driver of growth, despite slowing from 7.9 percent of growth in 2017 to 7.6 percent last year. Services contributed 3.9 percentage points to gross domestic product (GDP) growth, lifting the sector's share in GDP from 51.9 percent to 52.2 percent.
It said the consumer price inflation of China will remain benign at 1.9 percent in 2019 and 1.8 percent in 2020.
The report further said that public spending in 2019 and 2020 is expected to be higher than in 2018 to support the economy.
The report added that recent government steps to improve investment opportunities for foreigners will boost inflows of capital into the county.
"Inflows of capital will pick up," the report said.