China is expected to ramp up pro-growth measures early next year to boost domestic demand and help foster a new economic upturn that may begin by the middle of 2022, officials and experts said. The latest figures showed that the country’s production activities remained robust, but consumption and investment remained lukewarm, underlining the necessity for policy support to bolster market demand and buffer downside risks, they said. Industrial output rose by 3.8% year-on-year in November, up from 3.5% in October, the National Bureau of Statistics (NBS) said. Experts attributed the acceleration to the recovering supply of raw materials and energy, as well as buoyant export orders.
However, retail sales grew 3.9% year-on-year last month, down from 4.9% in October, as sporadic Covid-19 cases reduced offline consumption. The growth in fixed-asset investment (FAI) also slowed to 5.2% year-on-year during the January-November period, compared with 6.1% a month earlier, amid the slowdown in property development and infrastructure investment. Noting the weakening consumption and investment figures, NBS Spokesman Fu Linghui said the nation will step up efforts to expand domestic demand, strengthen macro policy adjustments and ensure the containment of Covid-19 to bolster consumer confidence.
“There remains a good foundation for overcoming the challenges and maintaining steady economic development next year,” Fu said, adding that domestic demand is expected to pick up steam amid improving household incomes, stable employment and the rollout of infrastructure projects. The policy-setting Central Economic Work Conference earlier this month acknowledged that the country is facing demand contraction and required action to safeguard macro-economic stability. Wu Chaoming, Chief Economist at Chasing Securities, said it is important to ramp up macro policy support early next year, when economic downward pressure may intensify due to weaker export growth and a slowing property sector. China’s central bank is likely to cut the interest rate in the first half of next year, which will help reduce financing costs, boost consumption and shore up market confidence, he said. Kristina Hooper, Chief Global Market Strategist at Invesco, said she expects China’s economy will pick up by the middle of next year amid macro support, and more cuts in the reserve requirement ratio (RRR) may take place, the China Daily reports.
