Long term Merit for Stable Growth: Foreign Investment Optimizes China's Economic Outlook Data | Policy | Economy

China Net Finance, September 15th - Since the Politburo meeting on July 24th, the central and local governments have timely introduced a series of "stable growth" policy measures, covering a wide range of areas, with precise positioning and many highlights, and have achieved initial results. Recent economic data released in August shows that multiple indicators such as PMI, CPI, import and export, credit, and social finance have shown an improvement trend.

So what are the next steps to take? Is it to wait for the existing policy effectiveness to ferment, or to continue to strengthen and stabilize growth? On September 14th, the "Scar Effect and China's Economic Recovery: New Challenges and Opportunities" seminar of the National People's Congress Chongyang Macro Situation Forum was held in Beijing. Experts and scholars evaluated and judged the current economic situation and future policy directions.

Stable growth should be achieved for a long time

The main economic indicators for August have recently been released, and data such as CPI, PPI, credit, social finance, and imports and exports all show that China's economic situation has crossed the low point of July and begun to stabilize and recover. Moreover, due to the lag in policy effectiveness, it is expected that the positive effects of the previous "stable growth" policy will continue to be reflected in economic data in the coming months.

"The response of policies to changes in the situation is timely and moderate." Sun Xuegong, Director of the Decision making Department of the China Academy of Macroeconomics, said that since the middle of the year, policies have been more intensively introduced, mainly due to fluctuations in the economic recovery process since the second quarter, with some indicators showing a decline in average growth rate over the past two years. In order to further enhance endogenous momentum, improve market expectations, and promote sustained economic recovery, a series of new incremental policies have been introduced in the fields of consumption, real estate, finance, and others.

He believes that macro policies should have foresight, dynamism, and adaptability. They should not only anticipate the situation and make arrangements in advance, but also respond promptly to new changes in the situation.

The improvement of economic data indicates that one can be blindly optimistic. Zhang Junkuan, Chairman of the China Development Research Foundation and former Deputy Director of the Development Research Center of the State Council, stated that while seeing the economic recovery improve, it is necessary to soberly recognize that the foundation of the current economic recovery is still not reliable, and problems such as lack of confidence are still prominent.

He said that during the epidemic, the employment, income, and confidence of residents have been greatly affected, and this "scar effect" cannot be solved with just one regulation. Encouraging consumption and boosting confidence are closely related to employment and the overall economic situation, similar to the problem of "chicken laying eggs, egg laying chickens". Therefore, it is necessary to continuously introduce economic promotion measures.

"Expanding consumption, promoting investment, and boosting confidence all require sustained efforts, and long-term efforts are the key," Zhang Jun said.

The expert's argument was also quickly validated. On the evening of the 14th, the central bank announced its second reserve requirement reduction of the year: a 0.25 percentage point reduction in the reserve requirement ratio for financial institutions on September 15, 2023. It is expected that this reserve requirement reduction will release medium - and long-term liquidity exceeding 500 billion yuan, injecting tangible benefits into the real economy.

Reform still needs to be pushed forward in depth

At the seminar, the Chongyang Institute of Finance at Renmin University of China released a research report titled "Insufficient Stimulus for Small Repairs and Small Subsidies, Great Opening and Closing Reforms - Economic Policy Review and Suggestions Since the Summer of 2023".

The report proposes "to compete with the economy, but more importantly, to compete with reform and opening up", and puts forward a series of reform deepening suggestions from three aspects: "improving a fair and neutral competitive environment for market entities", "building an inclusive and modern financial system", and "promoting market-oriented allocation reform and accelerating the transformation of government functions". For example, optimizing and innovating the structure of local government debt to alleviate the risk of the last mile of local debt; Clarify the boundaries between inclusive and commercial financial services; Timely optimize real estate finance and regulatory policies, and so on.

Sun Xuegong stated that in terms of reform, relevant departments have recently introduced multiple reform measures such as supporting private enterprises, enterprise reform, and improving negative lists, further unleashing market vitality and consolidating the foundation of economic recovery. The current reform has entered a deep-water zone, where interests are more intertwined and contradictions are more complex. Promoting reform requires more wisdom and greater courage.

"More reforms will promote more economic growth, and we are full of confidence in China's future economy," said Wang Wen, Executive Director of the Chongyang Institute of Finance at Renmin University of China.

Foreign investment is optimistic about China's economic prospects

During the seminar, Wang Lei, Chairman of the international investment company Seedex Group, released a research report on the Chinese economy in the eyes of foreign investors.

According to the report, after experiencing the fluctuations caused by the COVID-19 epidemic, China's economy has once again become the "locomotive" of the world economy. China's absolute advantage in manufacturing has shifted from being a "world factory" mainly relying on low-cost production and processes to being an innovator in various technologies. In some important strategic emerging industries, China has made breakthroughs and occupies a leading position globally. Although the sluggish real estate market in China has dragged down the Chinese economy, the average default rate of personal mortgage loans in China is only 0.45%, far lower than that of the United States and the United Kingdom.

"China has maintained a flexible macroeconomic framework that can adapt to and respond to constantly changing demands and dynamic conditions, while providing a buffer for any macroeconomic fluctuations and external shocks," said Wang Lei.

According to the analysis of Seeds Group, China will benefit from a number of emerging industries that are expected to become new growth engines, including electric vehicles, artificial intelligence, and 5G/6G.

"We believe that China's economic outlook should be much brighter than what some analysts or economists describe," said Wang Lei.