Source: Manila Times    Published: 2022-12-07

CHINESE economists predict that China would further step up monetary policy support after the government implemented measures to bolster the world's second-largest economy and ensure that growth falls within a reasonable range.

Discussions of easing monetary policy come as the East Asian country is set to hold the Central Economic Work Conference, which will outline top policy priorities for the next year, and as it implements 20 optimized measures to combat the coronavirus and boost economic development.

Predictions for more pro-growth policy measures came after the People's Bank of China (PBoC) reduced financial institutions' reserve requirements by 25 basis points (bps). The move could inject about 500 billion yuan ($69.72 billion) in long-term funds into the economy.

 

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China has more leeway in anchoring its monetary policy in 2023 as the country is likely to trend toward "easing" on the basis of a prudent stance, said Lian Ping, president of the China Chief Economist Forum.

The economy could face persistent downward pressure in 2023, and a proactive fiscal policy requires a supportive monetary one, he added.

Yu Yongding, a member of the Chinese Academy of Social Sciences, told a recent forum that China should prioritize shoring up growth rather than curbing inflation, according to a report by the financial news portal yicai.com.

He said placing an emphasis on curbing financial risks did not contradict efforts to ramp up economic growth.

Expansionary fiscal policy should be maintained, Yu said, suggesting that additional issuances of treasury bonds, further loosening of monetary policy, and lowering interest rates further should be among the tools applied by China's policymakers.

Experts interviewed by the Beijing-run tabloid Global Times said recently that ensuring stable economic growth would be the main theme next year, as the measures would also be aligned with the goal of seeking the high-quality growth stressed during the 20th National Congress of the Communist Party of China in October.

They noted that the easing of United States interest rate hikes would also provide an external environment for China to keep its monetary policy loose.

Liao Qun, chief economist of the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times there could be six more 50-bps cuts in reserve requirements down the road to provide more liquidity support.

He said the fiscal policy could also be ratcheted up with more treasury bond issuances, which would mean a higher deficit level.

These supportive policies will be directed toward infrastructure development, according to Liao.

"Infrastructure investment has been accelerated by a large margin, but there is still plenty of room for further, bigger investments, and such investments will also pave the way for high-quality development," he said.

As the Chinese economy faces headwinds from weakening external demand and the fallout from the coronavirus pandemic, Beijing has been ramping up policy support.

Last week, the PBoC and the China Banking and Insurance Regulatory Commission issued a 16-step guideline to encourage commercial banks to grant loans to real estate developers.

The Ministry of Industry and Information Technology, along with two other ministries, jointly issued a notice last week aimed at consolidating industrial production. The notice listed 17 measures to boost the development of major industries, various enterprises and different regions in China.

Li Changan, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, told Global Times that stabilizing economic growth would be on top of the government's agenda next year.

"The balance between epidemic control and economic development will also be an important theme," Li said, noting that if the Covid-19 crisis is kept at bay in 2023, a reasonable growth rate could be expected.

The Chinese economy expanded by 3.9 percent in the third quarter, official data showed. For the first three quarters, growth hit 3 percent year on year.

Liao said a reasonable annual economic growth range of about 5 percent should be attempted with macroeconomic policy support.