Economic development needs support, experts say

Photo taken on Nov. 4, 2020 shows a light show at the Lujiazui area in Shanghai, east China. A light show themed on the China International Import Expo (CIIE) was held in Lujiazui of Shanghai on Wednesday. (Xinhua/Zhang Haofu)

China is expected to roll out more policy support to boost the confidence of both public and private investment and help better unleash consumption potential to realize steady and healthy economic growth for 2021, experts and industrial insiders said.

A report issued on Sunday by Tsinghua University's Academic Center for Chinese Economic Practice and Thinking said China's GDP is expected to expand by 8.2 percent year-on-year in 2021, investment in fixed assets will continue to climb and the recovery of consumption will be relatively slower.

In response to the global trend of rising commodity prices and its possible impact on the domestic economy, the report said, such price surge is likely to be mild, because of speedy vaccination progress in many advanced economies in the latter half of the year, and will not strongly affect consumer prices or cause domestic inflation. The expansion of the consumer price index in China is likely to come in at 1.5 percent year-on-year growth this year, the report projected.

In a recent Morgan Stanley briefing, Robin Xing, its chief China economist, said China will face less inflation pressure compared with advanced economies, including the US.

Xing said this is because China's stimulus policy has tapered off and returned to normalcy at a relatively earlier stage.

Some of China's regulatory approaches in the economy, such as its regulation of virtual currency and various asset bubbles, sharply contrast with the aggressive stimulus in advanced economies.

Deepening reform

More efforts are needed for deepening structural reform in the long run and in optimizing relations between government and the market, Li Daokui, a professor and director of the Tsinghua think tank, said on Sunday at the release of the report.

In the long run, he said, there is huge potential in China's economic growth, as both the public and private sectors have strong willingness to work hard for a better living. Moreover, greater efforts will be made to ensure better synergy in the interactions between government and the market, Li said.

The report also said that the role of consumption in catalyzing growth has not been fully unleashed in the first two quarters, and the level of consumption has so far not returned to the pre-pandemic level, as an increase of business output has not effectively fed through to the level of household incomes.

"Also, the scattering resurgence of COVID-19 cases has wound down people's willingness to engage in offline activities, while the pandemic per se has deeply changed people's habits of buying and overall reduced the amount of offline consumption," said Li Bing, a researcher at the think tank.

Considering the stark differences in vaccine rollouts globally, multispeed recoveries are underway in all regions and across income groups, which makes the global recovery still uncertain, the report said.

Guo Meixin, a researcher at the Tsinghua think tank, pointed out that the renminbi has recently appreciated against the US dollar yet many uncertainties remain in this trend.

"The sizable stimulus measures in US and European countries will phase out once the COVID-19 situation gets effectively controlled, and liquidity is likely to subsequently flow back to developed countries," Guo said. "Therefore, the RMB's trend for appreciation is not likely to exist over the long run."

The report also suggested swifter efforts be made to prune local government debt and warned about certain operational difficulties for some medium-sized and small banks.

On Saturday, the G-7 group of countries announced they would set a minimum global corporate tax at a rate of at least 15 percent. Chen Xingdong, chief China economist at BNP Paribas, said that this is likely to draw investors from countries like China back toward advanced economies, and that China needs to move faster in improving the business climate.