Economy’s resilience, govt policies boost confidence

It was not long ago when many predicted a pessimistic year for the Chinese economy in 2019. They seemed well reasoned. After all, the world's second largest economy was under tremendous pressure from a trade war and internal structural issues. So when a slew of recent indicators painted a more upbeat picture, it caught many off guard.

Headlines around the world have described the recent positive data out of China unexpected, but a deeper look into the Chinese economy and government policies show that such a rebound did not come easily. It underscored the resilience of the Chinese economy that helps withstand the hardship which could crush other economies, analysts said.

Adding to the growing bullish view, a private survey released on Wednesday showed that China's service sector expanded at the fastest pace in 14 months. The Caixin/Markit Services Purchasing Managers' Index (PMI) rose to 54.4 in March, up 3.3 points from February.

The closely-watched Caixin/Markit manufacturing PMI, released on Monday, also rose to 50.8 in March, the highest reading in eight months, as new orders and staff levels showed sound improvement.

The Caixin/Markit survey, which focuses on smaller private firms, followed strong readings of official PMIs, which cover large State-owned companies. The official manufacturing PMI rose to 50.5 in March, while non-manufacturing PMI rose to 54.8. Together, they offer a positive picture of China's massive manufacturing and services sectors.

"[The rebound in PMI] is mainly because of domestic stimulus policies," Tian Yun, vice president of the Beijing Economic Operation Association, told the Global Times on Wednesday, adding that government pledges to reduce financial burdens for firms might have spurred activity.

Prioritizing stabilizing growth, the Chinese government announced cuts to taxes and fees totaling 2 trillion yuan ($298.22 billion) this year, while also vowing to cut red tape and create a better business environment.

Strong resilience

The strong PMI readings have sparked hopes that the Chinese economy may be bottoming out. "The new highs for both manufacturing and service PMI show that China's economy is stabilizing and improving," Liu Xuezhi, an economist at Bank of Communications, told the Global Times on Wednesday.

PMI readings are hardly alone in fueling optimism toward the Chinese economy. Recent developments from a bullish stock market to easing trade tensions with the US also injected much needed confidence into the Chinese economy.

Chinese stocks have been recovering from a tough 2018. On Wednesday, the Shanghai Composite Index gained 1.24 percent to close at 3,216.30, the highest level since March 2018. The index has grown 30 percent since the beginning of the year, buoyed by improving domestic sentiment as well as inclusion in global stock indexes.

Highlighting the role the Chinese economy plays in the regional and global economies, the uplifting data has buoyed stock markets in Asia and beyond. Following the PMI data release on Monday, stocks in Japan, South Korea and Australia all surged, with the KOSPI gaining the most at 1.2 percent.

There has also been positive development in China's external environment. There are high hopes that China and the US could reach a trade agreement to end the tariff war soon as officials are continuing talks in Washington on Wednesday.

There are also signs of improving ties between China and several trade partners, including the EU, Italy, France and New Zealand after recent interactions with high-level officials who vowed to further promote trade and economic cooperation. Italy, for instance, became the first country in the Group of Seven to sign up on the Belt and RoadInitiative.

All of these are boosting confidence in the Chinese economy, but they did not come easily and would have been impossible if it weren't for the strong resilience of the Chinese economy, analysts said.

"That is the robust manufacturing China has built over the decades, the motivation of the Chinese people to pursue better lives and the unswerving will of the Chinese government to focus on nothing but economic development," Tian said.

Still, officials and analysts warned that the hardships of the Chinese economy might be far from over, as downward pressure is expected to persist due to industrial transformation and a sluggish global economy.

"Let me stress that given the visible increase in uncertainties and destabilizing factors as well as externally-generated risks, difficulties and challenges may still lie ahead," Chinese Premier Li Keqiang said in a speech at the BoaoForum for Asia on March 15.

"Nevertheless, we will carry on with our policies as long as the major economic indicators are kept within the appropriate range the whole year," he remarked.