Editor's Note:

With the recent economic data pointing to a soft start to the year, there is growing anticipation of more pro-growth measures in the pipeline. But how the cooling economy would be addressed at the ongoing annual legislative and political consultative sessions, and to what extent the economy would regain steam, remains the biggest question. The Global Times discusses four key issues facing the Chinese economy.

Chinese reporters on Tuesday gather in front of the Great Hall of the People where the onging two sessions are being held. Photo: IC

Arresting a slowdown

Together with a lower official GDP growth target for the year, "relaxing monetary and fiscal policies" will be confirmed at the session of the National People's Congress (NPC), to help stabilize growth, UBS Securities economists led by Wang Tao said in a research report e-mailed to the Global Times on Monday.

That said, the 2015 fiscal deficit is likely to be 2.5 percent of GDP, an increase from about 2.1 percent planned in 2014, the economists projected.  They said that further adjustments to the monetary policy would "keep broad money and credit growth stable."

In the latest move to assure the market, the People's Bank of China (PBC), the country's central bank, announced on Saturday a second interest rate cut in nearly three months, shortly before the opening of the two sessions of the NPC and the National Committee of the Chinese People's Political Consultative Conference (CPPCC), on Tuesday.

If the February data that include inflation figures scheduled to be unveiled around on March 10 disappoint, another broad-based reserve requirement ratio (RRR) cut would likely occur in March, Barclays Capital economists led by Chang Jian told the Global Times on Monday.

As for the housing market which underwent policy adjustments over the past year, analysts also played down fears that the housing sector may slide in 2015.

Loosening measures including the latest interest rate cut would certainly help reduce housing loans, Xia Dan, an analyst at the Bank of Communications in Shanghai, told the Global Times.

In the coming months, the central government may continue tweaking the monetary policy and cut the sales tax on secondhand homes to boost the real estate market, Xia said. She added that the property sector is likely to enjoy a rebound beginning the third quarter.

Still, too much attention to monetary easing measures should be avoided, Yuan Yafei, founder and chairman of Nanjing-based conglomerate Sanpower Group, told reporters on Tuesday at the opening of the Third Session of the 12th National Committee of the CPPCC, the country's top political advisory body.

The emphasis should be on an innovation-oriented economy amid a "new normal" of slower yet higher quality growth, said Yuan, also a CPPCC member.

Financial reforms set to deepen

While a series of reforms is expected this year, in areas that include free trade zones, pensions and healthcare insurance, and the State-owned sector, financial deregulation remains the focus.

In a sign of rising efforts to ease regulations in the financial sector, the latest interest rate cut was announced by the central bank together with greater leeway to banks in setting deposit rates. Beginning on Sunday, the ceiling on deposit rates that financial institutions are allowed to offer was raised from 1.2 times the benchmark to 1.3 times.

The move reflects the ongoing interest rate liberalization, economists at the ANZ Banking Group told the Global Times on Sunday.

Large State-owned commercial banks, including Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China, have set their deposit rates at 1.1 times the benchmark following the rate cut announcement, while some smaller banks such as Bank of Nanjing and Evergrowing Bank have adjusted deposit rates to 1.3 times the benchmark.

In addition, more measures are expected to further open up the capital market.

One of the most-anticipated moves might be the potential launch of a stock exchange link-up between Shenzhen and Hong Kong exchanges some time in 2015, modeled after the Shanghai-Hong Kong Stock Connect scheme. An expansion in the existing Shanghai-Hong Kong Stock Connect to include more products and asset categories is also being considered.

Environmental protection

Suffering from frequent smog, Chinese people now attach more importance to the environment rather than mere economic growth.

Official news portal people.com.cn conducted an online survey in late January to find out what netizens expect the coming two sessions of NPC and CPPCC would discuss.

With more than 3.7 million participants as of press time, the survey showed that environmental protection ranks seventh among the top 10 issues that concern them the most.

China has announced it would pursue a healthier economic growth through industrial restructuring and upgrading.

China will make efforts to reduce fossil fuel consumption and promote clean coal technology, Chinese Premier Li Keqiang said at the World Economic Forum annual meeting in January, noting that clean coal is a market with a large potential.

China should increase investment in environmental protection industries, which could prove to be a new growth engine, Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, a Beijing-based think tank, told the Global Times on Monday.

Entrepreneurs are also concerned about reducing emissions from factories. Zong Qinghou, founder and chairman of Chinese drinks giant Hangzhou Wahaha Group, will submit a proposal to the NPC session to better manage the payment of environmental protection fees.  

Enterprises have to pay pollution charges but are unaware of how these fees are used to protect the environment, Zong said in the proposal sent to the Global Times on Sunday. He added that more specialized research on pollution sources, such as car emission, are needed for targeted solutions to be taken.

Regulation on Internet finance

With Internet finance thriving in 2014, regulation on the emerging industry has become a concern.

In addition to online payment tools which have greatly facilitated daily life, peer-to-peer (P2P) platforms and Internet banks have also attracted much attention. P2P lending has developed rapidly since the end of 2011 as part of the country's unregulated shadow banking system.

As of the end of 2014, there have been about 1,600 P2P platforms in China, with more than 900 of them launched in 2014 alone, news portal people.com.cn reported on Tuesday.

But because of the legal ambiguity surrounding the operations of P2P lending, defaults and fraud have become common and market players hope for clear regulations to ensure the sector's development.

"We expect that regulations will be released soon to ensure a fair market environment," Wei Wei, a co-founder of Beijing-based P2P company JimuBox, told the Global Times on Tuesday.

He also noted that despite some failures, P2P lending can help build a better credit system and provide support to small and medium-sized enterprises.

The China Zhi Gong Party, one of the eight non-Communist parties in China, will propose to the CPPCC to include Internet finance in the financial regulation system, Beijing-based newspaper Securities Daily reported on Monday.

Internet finance platforms and products should be included in the overall regulation network composed of the central bank, China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission, as well as local financial regulators, according to the proposal.

The proposal also recommended a "negative list" approach by telling what are forbidden in a bid to reduce risks while ensure market freedom.

Global Times