Intensified policy support to maintain economic stability

A worker checks the operation of a carbon fiber production line at a factory in Lianyungang, Jiangsu province. [Photo by Geng Yuhe/for China Daily]

Chinese policymakers are expected to intensify policy support for economic stability in response to downward pressures on growth next year, analysts said on Tuesday.

They expected policymakers to take more steps to shore up growth next year, including increasing countercyclical adjustments and enhancing cross-cyclical adjustments.

Their comments came after a meeting of the Political Bureau of the Communist Party of China Central Committee on Monday set the tone for the nation's economic policies next year, highlighting stability as the top priority. Xi Jinping, general secretary of the CPC Central Committee, presided over the meeting.

The top leadership said the nation will strive to stabilize the fundamentals of its macro economy next year, with steps to make its fiscal policies more efficient, targeted and sustainable, and China will continue to implement a proactive fiscal policy and a prudent monetary policy.

While China's economy is set to maintain the trend of recovery, there are rising uncertainties and risks, both domestically and externally, such as further COVID-19 outbreaks, said analysts.

They see countercyclical and cross-cyclical adjustments as crucial to coping with the downward pressure in 2022, saying that a proactive fiscal policy should have a greater effect on stabilizing the economy while a prudent monetary policy should maintain reasonable liquidity to support the recovery.

Looking ahead, Luo Zhiheng, deputy director and chief macroeconomic analyst at the research department of Yuekai Securities, estimated 5.2 percent GDP growth in 2022, with consumption, manufacturing investment and new infrastructure investment serving as the key driving forces.

Luo said the emphasis on maintaining economic stability and policy effectiveness underscored the leadership's intention to shore up growth, and he expected to see more supportive policies to stabilize consumption and investment and expand domestic demand.

Luo's views were echoed by Wu Chaoming, chief economist at Chasing Securities, who said the government should take more steps to expand effective investment and spur consumption.

"With the government's effective measures to stabilize the economy, we may witness better economic performance in the second half of 2022 compared with the first half. And China's overall prices will increase moderately next year," Wu added.

Xu Hongcai, deputy director of the China Association of Policy Science's economic policy committee, said policymakers will strive to ensure macropolicies are prudent and effective, with targeted measures to support key fields such as small and medium-sized enterprises and sectors closely linked with people's livelihoods.

Xu said that as the world economy may face rising downward pressure and mounting risks in fields such as supply chains, the climate and inflation, China needs to maintain its strategic resolve and ensure the continuity and consistency of its macroeconomic policies.

The People's Bank of China announced on Tuesday a cut of 25 basis points in the interest rates of the relending facility supporting agricultural and smaller businesses.

After the cut, the one-year relending interest rate is 2 percent, the three-month rate is 1.7 percent and the six-month rate is 1.9 percent, according to a statement on the central bank's website.

The move follows the central bank's decision to cut financial institutions' reserve requirement ratio. As a result of that move, the central bank freed up 1.2 trillion yuan ($188 billion) of liquidity into the financial market to support economic growth.

Wen Bin, chief researcher at China Minsheng Bank, said that the latest measures by the central bank indicated that the monetary authorities prefer to use targeted monetary policy tools that are more efficient in supporting economic development.

Financial support for agriculture and smaller businesses, which are vulnerable sectors amid the COVID-19 pandemic, still needs to be further strengthened, said Wen, who added that the central bank is expected to increase relending to smaller businesses by about 300 billion yuan in the fourth quarter of this year.