Growth factor: A man watches an aircraft landing at Hongqiao International Airport in Shanghai. China’s recovery will depend on the continuous optimisation of Covid control measures and the level of domestic market demand and market confidence. — AFP
BEIJING: China must further strengthen the implementation of a proactive fiscal policy next year to underpin economic recovery despite many ongoing challenges, experts say.
In 2023, the Chinese economy will enter a period of transition to replace old growth drivers with new ones. The internal and external environment of economic development may improve.
In addition, the country may continue to optimise Covid-19 prevention and control measures.
This is conducive to the gradual recovery of production and will help revive the real estate market step by step, said a report recently published by the BOC Research Institute.
Due to these factors and the low-base effect this year, China’s macroeconomic indicators are expected to improve next year.
To what extent the economy will recover depends on the continuous optimisation of Covid-19 control measures and the level of recovery of domestic market demand and market confidence, the report said.
China’s fiscal policy will remain a key mechanism to bolster economic recovery next year.
On the one hand, the country should highlight the importance of stabilising employment, extend policies on tax cuts and refunds as well as fee reductions appropriately, and continue promoting the recovery of the real economy, especially micro and small enterprises.
On the other hand, it is necessary for the government to expedite actions on rural vitalisation, technology enhancement, and the construction of a modernised industrial system and major infrastructure projects.
Considering that China will have a tremendous demand for growth stabilisation and a large amount of debt will mature in 2023, researchers at the BOC Research Institute suggest policymakers consider raising the target deficit-to-gross domestic product (GDP) ratio for next year to 3% or more, up from around 2.8% this year.
Lian Ping, chief economist at Zhixin Investment and head of the Zhixin Investment Research Institute, said China should step up its proactive fiscal policy next year and may need to raise the target deficit-to-GDP ratio to 3.2% or more.
It is necessary for the country to keep fiscal expenditure at a reasonable scale and further optimise the structure of government expenditure.
Lian advised policymakers to set a 2023 quota of more than 3.5 trillion yuan (US$501.5bil or RM2.2 trillion) on special-purpose bonds for local governments, which is roughly the same as the quota of 3.65 trillion yuan (RM2.3 trillion) this year, thus continuously giving play to the role of infrastructure investment in spurring expansion of demand.
The government could also increase disposable household incomes through the adoption of policy instruments to stabilise consumption growth.
From the end of this year to next year, the People’s Bank of China (PBoC), the central bank, may explore new areas to use structural monetary tools.
It may consider setting up a special re-lending facility to encourage commercial banks to issue consumer loans at lower rates in order to promote interior design, travel and purchases of furniture and home appliances, he said. — China Daily/ANN
