In this undated photo, a Chinese clerk counts renminbi yuan banknotes in Nantong, East China's Jiangsu province. (PHOTO / IC)

China has been taking measures to defuse risks and optimize policies that will help formulate the dual circulation cycle, laying the foundation for high-quality development, policy makers and economists said on Wednesday. 

The Chinese economy needs improving economic efficiency, internal innovation capabilities, and promoting common prosperity. The government’s monetary, fiscal, and regulatory policies need to focus on relevant goals and provide a sufficient impetus for innovation.

Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority

They made their comments during the 12th Annual International Conference on the Chinese Economy, which was hosted by Hong Kong Institute for Monetary and Financial Research, the research arm of Hong Kong Academy of Finance.

Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority, said the COVID-19 pandemic, the necessary adjustments to govern the platform economy and the real estate industry, coupled with the restructuring of global supply chains, as well as the blockade of high-tech industries and trade protectionism, has complicated the external environment that China is facing.

“The Chinese economy needs improving economic efficiency, internal innovation capabilities, and promoting common prosperity. The government’s monetary, fiscal, and regulatory policies need to focus on relevant goals and provide a sufficient impetus for innovation,” Yue said.

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Wang Yiming, vice-chairman of the China Center for International Economic Exchanges and chairman of its Academic Committee, said the Chinese economy can grow 3.5 percent this year if the recovery pace can continue in this quarter. Considering the low base of this year’s growth rate, it is predicted that next year’s economic growth will reach more than 5 percent.

Photo taken on Sept 9, 2020 shows the view of the skyscrapers of the Central Business District in Beijing. (PHOTO /XINHUA)

The current short-term policy goal must maintain the sustained recovery of the economy and strive to achieve the best results this year; otherwise, the economic growth rate will continue to be lower than the potential growth rate, which may have serious medium- and long-term impacts.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges and chairman of its Academic Committee

“The current short-term policy goal must maintain the sustained recovery of the economy and strive to achieve the best results this year; otherwise, the economic growth rate will continue to be lower than the potential growth rate, which may have serious medium- and long-term impacts,” Wang cautioned.

“As the risk of recession in major economies is now rising, the contribution of foreign trade exports to China’s gross domestic product next year may be smaller than this year, making it particularly urgent to restore domestic consumption demand. The Chinese government may appropriately increase the deficit ratio next year to maintain the stability of the local debt scale,” Wang said.

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He added that with policy adjustments, real estate investment is expected to bottom out and rebound next year, and the growth rate of infrastructure investment may maintain a similar level this year.

Wang also said that if the US Federal Reserve slows down its pace of raising interest rates in the first half of next year, related economic pressure will also be weakened accordingly, which may increase the central government’s monetary policy space accordingly.

In the long term, Wang said China must unleash market vitality and increase growth through deepening reform and opening-up.

Goldman Sachs Chief China Economist Shan Hui estimates Chinese economic growth rate will reach 4.5 percent next year, mainly because of a significant rebound in consumption, a moderate rebound in inflation, and a slight contraction and withdrawal of fiscal policy, assuming there is a withdrawal of the “dynamic zero-COVID” policy.

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“Even if the mainland reopens its economy, it may take until the second half of next year to the first half of 2024 to rebound strongly; in the longer term, facing various structural challenges may inhibit economic growth in the next five to 10 years. In 2025, the growth rate will drop to 4 percent,” Shan said