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Vanguard: China may turn to easier monetary policies in H2

VANGUARD, the world's largest mutual fund company, said it expected China GDP to increase 6.3 percent this year with monetary policies likely to be easier in the second half to support growth.

Wang Qian, chief Asia-Pacific economist of Vanguard, said a recovery of the traditional state-led industries helped stabilizing the China economy, but meanwhile delayed structural reforms.

The institute's GDP expectation was lower than market consensus for 6.5 percent.

The International Monetary Fund this week revised up its expectation for China GDP growth to 6.5 percent from 6.2 percent.

Vanguard said a recovery of the commodities and other cyclical industries are likely to extend into the first half this year as the industries restock inventory.

But downward pressure is likely to return in the second half as the momentum ebbed amid uncertainties of US trade policies towards China.

Monetary policies are likely to be tighter in the first half to meet authorities' goal in deleveraging and preventing financial risks, while easing up in the second half to support growth.

The yuan depreciation will accelerate this year on the prospect of US interest rate hikes, uncertain trade outlook, and increasing willingness among residents and companies to hold foreign exchanges.

China will likely continue to apply tight control on capital outflow to stabilize exchange rate market in stead of making a one-time yuan devaluation, Wang said.


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