Large domestic market, complete industrial chains to help recovery

 

China's economic activity will likely return to a reasonable range next year after staging a V-shaped moderate recovery this year, underpinned by targeted macro policy support and infrastructure spending along with a steady recovery in consumption, economists said.

 

Despite facing challenges amid a cloudy global outlook and COVID-19 outbreaks, they said China has the solid foundation and conditions to achieve sustained growth with the support of its ultra-large domestic market and complete industrial chains, with the country having plenty of room for monetary easing and strong fiscal stimulus.

 

More efforts should be made to boost household spending and private investment, stabilize the property market, foster innovation-driven and green development, continuously deepen reforms and expand opening-up, and ensure smooth industrial and supply chains, according to the economists.

 

"The Chinese economy should be able to recover strongly in 2023, with the removal of the hard constraint imposed by the previous COVID-19 policy. Implementing expansionary macroeconomic policy effectively is key for its 2023 growth," said Yu Yongding, a former central bank adviser and a member of the Chinese Academy of Social Sciences.

 

While China may still face challenges such as supply chain disruption by the pandemic and emerging inflationary pressure in 2023, Yu said he believed that the world's second-largest economy will gradually return to a decent growth trajectory in line with its potential.

 

Policymakers may need to set a growth target for 2023 higher than that of this year due to this year's low base, he said.

 

Yu's comments came as the market eagerly awaits clues to next year's economic policy agenda from the upcoming annual Central Economic Work Conference. The top leadership has sent a clear signal to strongly boost market confidence and achieve an overall improvement in economic growth next year.

 

During a recent meeting of the Political Bureau of the Communist Party of China Central Committee, top policymakers called for better coordination between COVID-19 containment and socioeconomic development, and a comprehensive deepening of reform and opening-up.

 

Xie Fuzhan, former president of the CASS, said that the fundamentals of the Chinese economy remain unchanged to support its long-term growth, and the country has plenty of room to step up macroeconomic policy support.

 

At a forum on Tuesday, he said that coordination between fiscal and monetary policies should be strengthened and he expected to see proactive fiscal policy and targeted monetary policy support for boosting domestic demand and propping up growth.

 

Charlie Zheng, chief economist at Samoyed Cloud Technology Group Holdings, expected a steady rebound in both investment and consumption in China next year.

 

Citing risks from a more complicated and grimmer external environment, he highlighted the importance of boosting domestic demand and internal economic circulation, saying the government needs to increase support for lowincome groups, ease burdens on private enterprises and strongly boost the development of the digital economy and green economy.

 

Meanwhile, Robin Xing, chief China economist at Morgan Stanley, said China's economy will gradually shake off the COVID-19 impact next year.

 

He said his team expected to see a notable economic rebound supported by the recovery in private consumption, especially spending on services.