Experts pitch for reforms to drive growth

Growth: Policy efforts could help reach potential

China should consider amplifying macroeconomic support in a precise manner next year to underpin a steady annual economic growth rate of around 5 percent, experts said on Sunday.

A flood of stimulus measures would be inappropriate in 2024 due to potential side effects and a narrowing policy scope, they said at a forum, stressing the need to prioritize the deepening of market-oriented, rules-based reforms to drive growth.

Xiao Gang, former chairman of the China Securities Regulatory Commission, said the Chinese economy has seen continuous recovery this year but still faces multiple challenges, ranging from shrinking external demand and insufficient domestic demand to restrictions imposed by some Western economies on China and the competition from other emerging economies.

To cope with the challenges, it is sensible for China to ramp up proactive fiscal policy and optimize the debt structure as most of the government debt at present is in the form of borrowings by local governments, Xiao said at the annual meeting of the China Macroeconomy Forum, a think tank of the Renmin University of China.

Speaking at the same event, Gao Peiyong, an academician of the Chinese Academy of Social Sciences, said that macroeconomic policies should precisely support the critical links in economic recovery as wide-ranging, large-scale stimulus have seen a diminishing policy effect and could trigger longer-term pain.

Deepening reform would be of most significance to deal with the prominent problem of weakening market expectations, Gao said.

The remarks come at a time when attention is focused on how the upcoming annual Central Economic Work Conference, which usually takes place in December, will set the tone for economic policy setting in 2024 after the country's GDP growth rate touched 5.2 percent year-on-year in the first three quarters.

Yu Ze, deputy dean of the School of Economics at the Renmin University of China and a member of the macroeconomy forum, said that according to the think tank's forecast, China's economy will stabilize further in 2024 and register a full-year growth of around 4.8 percent year-on-year, up from an estimated two-year annualized growth rate of 4.1 percent from 2022 to 2023.

The two-year annualized growth rate corrects the distortion of COVID-19 disruptions in 2022 on economic figures.

Drivers of growth would include improving corporate earnings, recovering household income, stabilizing property sector activity and accelerating export growth, coupled with structural growth drivers such as the combination of artificial intelligence with 5G applications, Yu said.

Experts said 4.8 percent growth would still underperform the rate seen before COVID-19 — China's economic growth stood at 6.1 percent in 2019 — making policy efforts necessary to bring growth back to its potential level.

"We suggest setting next year's economic growth target at 5 percent," Yu said, which will help stabilize employment, bolster market expectations and ensure the fulfillment of development goals of the 14th Five-Year Plan period (2021-25).

To achieve the target, China should prioritize deepening market-oriented reforms, especially in regard to the capital market and the fiscal system, while stepping up macroeconomic adjustments, such as raising the fiscal deficit ratio and further reducing financing costs, Yu said.

Wu Xiaoqiu, former vice-president of the Renmin University of China, said the scope for using stimulus to boost growth has narrowed and policymakers must use it in crucial areas, adding that the country's total government debt burden is close to the average level seen in developed economies based on some calculations.

Wu said the country's money supply should not expand excessively, which would impair the credibility of the renminbi and hinder its internationalization. "Instead of short-term stimulus, a rules-based system with consistent, stable and effective regulations is the fundamental solution to problems facing the Chinese economy."

Pan Gongsheng, governor of the People's Bank of China, vowed earlier this month that the country's central bank will maintain a reasonable growth of money and credit supply while amplifying support for specific areas such as technological innovation, private and small businesses, advanced manufacturing, green development and eldercare.