Illustration: Xia Qing/GT

Editor's note:

Amid the slowing global economy, the bruising China-US trade war and the decline in internal demand, China's economy in 2019 has continued the weak trend seen since 2018, and this is expected to continue in 2020. In the year that China aims to secure the victory of building a moderately prosperous society in all respects, how will the country deal with the negative factors and maintain growth? Here is some advice from Chinese economists:

Liu Yuanchun, vice president of Renmin University of China

A growth range of 5.5-6 percent would be an appropriate goal for China in 2020. A conservative estimate for the whole year would be around 5.8 percent.

It's important to have a medium-term perspective and managed expectations when developing macro policies. Both policy makers and market players should have a forward-looking perspective.

The principles emphasized at the fourth plenary session of the 19th Communist Party of China Central Committee should be implemented. A new round of comprehensive reforms and opening-up should be carried out. By deepening supply side reforms, structural and systemic issues at deeper levels can be resolved.

M2 growth in 2020 should be higher than nominal GDP growth. The total private financing growth should not be reduced too quickly. A growth rate of around 11 percent is in accordance with appropriate financial rectification and restrictions.

Fiscal policies should be more positive and more targeted. The fiscal deficit rate should be kept above 3 percent in 2020. More tax cuts and fee reductions should be carried out, not just in production, but also in consumption and distribution of income.

In order to maintain investment, policy tools and direction need significant adjustments. The crucial role of investment should be fully utilized in optimizing supply side reform.

Policies to secure and improve people's wellbeing should be put in a fundamental position. The fact that people's wellbeing may be affected by external factors and pressure from the economic slowdown deserves more attention.

China should positively cope with the China-US trade war, and rethink the strategic choices during a restructuring period for the world's order. The global industry chain, supply chain and value chain are facing changes and China needs to make new plans with a forward-looking and broad perspective. Attention should also be paid to potential US strategies such as some kind of "Economic Iron Curtain" or a "New Cold War."

Lian Ping, chief economist at the Bank of Communications

In order to better guide market expectations, maintain market confidence and develop positive and achievable goals for relevant sectors, China should set an economic growth goal for 2020 of around 6 percent.

More positive fiscal policies need to be introduced in 2020 to strengthen countercyclical adjustments and prevent a further slowdown in economic growth. The fiscal deficit rate can be raised to 3 percent or even higher. The size of local special bonds can be raised to more than 3 trillion yuan, and the issuance time could be advanced to the beginning of the year. The utilization areas should also be expanded to increase the fiscal resources of local governments and help stabilize growth.

Monetary policies for countercyclical adjustments need to focus on increasing credit. By increasing credit, policies' margin effects will be improved. Specifically, China could tighten regulations on banking risk management, providing rational targeted liquidity to commercial banks and improving their willingness and capacity to give loans.

Stabilized yuan exchange rate and cross-border capital flows should be maintained. First, prudent restrictions should be maintained, preventing continuous capital outflows. Second, the convertibility capacity of yuan capital items and steady expansion of bond and stock market openness so as to attract cross-border capital inflows should be prudently and gradually promoted. Third, the management of foreign exchange for corporate and personal investments should be strengthened and the management of personal foreign exchange purchase quotas should be maintained. Fourth, market expectations should be reasonably guided. China should increase policy transparency, reduce the disturbance of irrational expectations amid asymmetric information, and pursue timely and reasonable intervention in the foreign exchange market.

The real estate policy should basically meet the reasonable housing demand of residents. The policy should adhere to the general tone of "do not speculate in housing" and should adopt different measures in accordance with specific cities.

A balance between supply and demand in the pork market should be found, to prevent pork prices from rising continuously.

Liu Rui, professor with the School of Applied Economics, Renmin University of China

It would be appropriate for China to set its economic growth goal at around 6 percent for 2020. In general, stability is still the key for China's macroeconomic policies. China should promote structural adjustments, such as giving better support for emerging industries and deepening reform in these sectors.

The China-US trade war remains a source of significant uncertainty for China's economy in the next year. China should also prepare for a potential worsening of the situation. However, the worst impacts from the trade war have probably passed. Companies that depended on exports to the US have taken measures and finished adjustments. No great impacts are expected in 2020.

It's crucial for China to achieve better progress in supply side structural reform, which will hedge against downward pressure on traditional industries and business models.

New policy goals need to be made for structural reform in traditional sectors, because the first phase, involving targets such as reducing capacity, has finished. 

More significance should be attached to the manufacturing sector. The services sector has been benefiting from greater consumption, but the improvements should not just be in quantity and growth, but also in transformation of the consumption model and methods.

Fiscal policies should be more positive. The fiscal deficit rate should be allowed to reach or just exceed 3 percent. Meanwhile, stimulus should not be flood-like. Projects requiring more investment need to be considered but should also be controlled.

Monetary policy should be locked to the target of stabilizing the financial market and preventing more financial risks. Systemic financial risks deserve a high degree of caution.
Newspaper headline: Advice for China’s economy in 2020