Visitors take pictures and enjoy food at a market in Nanjing Pedestrian Road, a main shopping area in Shanghai on December 15, 2022. Photo: Xinhua

 

After the Central Economic Work Conference called for an overall improvement in economic operations in 2023, there is a growing confidence in a rapid recovery of the Chinese economy despite lingering obstacles from the COVID-19 pandemic and external challenges, with some Chinese economists predicting a robust GDP growth rate in 2023.

To deal with the challenges, China will further step up policy support for economic growth in 2023, with the intensity of fiscal and monetary policy to further intensify compared with that of 2022 and stepped-up support is also expected in boosting consumption and other areas that have been hit hard by the epidemic, Chinese analysts said.

Growing confidence

China is poised for an accelerated economic recovery in the first half of 2023 and overall recovery and improvement is expected in the country's economic performance in the next year, senior Chinese economic officials said at an annual conference of the China Center for International Economic Exchanges (CCIEE) over the weekend, which focused on China's economic development in the coming year.

Coming after the Central Economic Work Conference, a closely watched meeting that sets the tone for China's economic policymaking in the coming year, concluded on Friday, the CCIEE meeting, which was attended by senior economic officials, including those from China's central bank and the Ministry of Finance, was focused on the interpretation of the spirit of the Central Economic Work Conference.

At the CCIEE meeting, senior officials and economists had a consensus on increased policy support for economic development in 2023 and a rapid recovery.

It is expected that life and production will recover at a faster pace in the first half of 2023, releasing vitality into economy with the optimization of COVID 19 measures, Han Wenxiu, an official with the Central Committee for Financial and Economic Affairs, said at the annual meeting of Chinese economy.

"We have the confidence, the condition and the ability to promote an overall improvement in our country's economic operation," Han said at the CCIEE meeting, adding that optimizing epidemic prevention measures, stock policies and incremental policies as well as the base effect this year should form certain support for next year's economic data and have a significant positive impact on economic recovery and development.

The Central Economic Work Conference also stressed on the promotion of an overall improvement in economic operations in 2023, while putting stabilizing growth, employment and prices at a prominent position in economic policymaking. The conference also vowed a series of pro-growth measures, including higher-intensity fiscal policies and support for restoring and expanding consumption.

Stronger policy support

Among the other major takeaways, the conference stressed the need to step up proactive fiscal policy to maintain the necessary fiscal spending intensity as well as prudent monetary policy to keep reasonable and ample liquidity.

Liu Guoqiang, deputy governor of People's Bank of China (PBC), also said at the CCIEE meeting on Saturday that the force of China's fiscal policy for 2023 will be at least equal or more intensified than this year with targeted efforts to the key and weak links in the economy when summarizing next year's monetary policy arrangement.

"The monetary policy should meet the needs of the real economy, ensuring reasonable and sufficient liquidity in the financial market and keeping the price of capital reasonably flexible without dramatic fluctuations," Liu said, adding that China has sufficient room in monetary policy tools and rich liquidity management means and experience to keep the monetary policy ample.

In terms of the fiscal policy, Xu Hongcai, vice finance minister on Saturday said that the fiscal policy should be stepped up to strengthen financial resources for major national strategic tasks, appropriately expand the scale and area of government investment and do a good job in providing help and assistance to unemployed people in need.

The fiscal and monetary policies announced this time could be the most positive narrative of macro policy in nearly a decade, Tao Chuan, an economist with Soochow Securities, told the Global Times on Sunday, expecting tools like policy-based financial instruments and relending to play a bigger role next year.

Wu Chaoming, deputy head of the Chasing Research Institute, echoed that there will be stronger strength in using policy-based financial instruments to keep sufficient support for infrastructure construction and technological reformation.

The effect of fiscal and monetary policies on stabilizing the economy cannot be achieved without stabilizing domestic demand. As a crucial part of efforts to stabilize growth, the Central Economic Work Conference also prioritized restoring and expanding consumption which has been prioritized in a plan to boost domestic demand last week.

Prior to the key meeting, China revealed a guideline aimed at further expanding domestic demand with the goal to raise the scale of consumption and investment to a new level by 2035.

Commenting on consumption, officials said that supporting people's reasonable housing demand, unleashing the potential of travel consumption, and actively developing consumption of services sector should all be the drivers of boosting consumption next year.

Housing and automobile will remain major areas for household consumption in the short term, while elderly care will become another major sector in the long run, Tao said, forecasting that interest rates, in particular the mortgage interest rates, may see further trim next year.

Tao added that it takes policy guidance to restore the market's expectation and confidence. In addition to stabilizing employment and increasing people's income, issuing consumption coupons may be an important tool to improve residents' consuming enthusiasm quickly.

Officials on Saturday also stressed on keeping the overall stability on housing, "which is a pillar industry and must not fluctuate significantly," Liu from the PBC said.

Liu said it is an urgent task to stop the decline in the property market while reiterating the stance that housing is for living not for speculating.

According to the Central Economic Work Conference, efforts should be made on effectively forestalling and defusing major economic and financial risks, promoting the steady development of the property market, ensuring timely deliveries of pre-sold housing and meeting the reasonable financing demand of the sector.

Promoting the restructuring, mergers and acquisitions of the industry and effectively resolve the financial risks of high-quality housing enterprises are two key approaches to improve the slumped real estate sector in the short term, Wu said.

Rapid economic growth

Despite COVID-induced disruptions, China's economic output is likely to exceed 120 trillion yuan ($17.2 trillion) in 2022, Han noted. Over the past three years, China's GDP growth rate averaged 4.5 percent, which is significantly higher than the world's average.

"There is a gap between economic growth and the expected target set at the start of this year, but many other indicators were better accomplished," Han said.

The joint effort of the fiscal, monetary and industrial polices and the optimized epidemic prevention measure is poised to benefit the Chinese economy next year, experts said.

The optimized COVID-19 approach is expected to unleash confidence in spending and the mix of the macro and industrial policies is expected to boost the sentiments of the market and help restore production, Wu said.