Stable growth to be focus of policy support

Experts emphasize need to boost market confidence, stimulate demand in 2024

China is expected to step up policy support for micro, small and medium-sized enterprises and advanced manufacturing in a more precise manner, while also paying more attention to prevent industry regulatory measures from constraining economic vitality, experts said.

Their comments came after Han Wenxiu, executive deputy director of the Office of the Central Commission for Financial and Economic Affairs, emphasized the importance of introducing more policies that will help stabilize expectations, growth and employment, as well as the need to "cautiously release contractive and restrictive policies", to create favorable conditions for development.

In an article published on Tuesday in People's Daily, Han called for more efforts to pursue progress while ensuring stability, consolidate stability through progress and establish the new before abolishing the old, as requested by the annual tone-setting Central Economic Work Conference, which was held in December.

Experts called on the government to further prioritize economic growth and enhance policy coordination, to avoid causing potential risks when it is defusing existing risks and promoting a growth model transition and structural adjustment.

They said that fiscal policies should amplify the positive effects of government investment on boosting market confidence and stimulating aggregate demand in a bid to anchor the momentum of economic recovery.

Luo Zhiheng, chief economist at Yuekai Securities, said, "China is at a critical moment of growth momentum transition, and it is important to avoid disturbing economic stability and weakening expectations."

"To be specific, China should further put economic growth at the core place so that measures to defuse risks will not cause unintentional new risks, and the country will have time to solve existing problems amid continuous economic development," Luo said.

It is important for the nation to better coordinate fiscal and monetary policies, as well as economic and noneconomic policies, to prevent some restrictive noneconomic policies — including those on industrial regulation and environmental protection — from offsetting the positive effect of economic policies, he said.

The annual work conference of the Ministry of Finance, which was held in late December, affirmed that China would implement a moderately expansionary fiscal policy in 2024 while improving the efficiency and effectiveness of fiscal governance.

Experts said the country will continue to allow the budgeted fiscal deficit rate to exceed 3 percent and issue around 4 trillion yuan ($560.6 billion) of special-purpose local government bonds in 2024 — a key funding source of infrastructure investment that usually is not included in the fiscal deficit.

Lou Jiwei, chairman of the Global Asset Management Forum and former finance minister, said that China should maintain the fiscal deficit rate at around 3.8 percent in 2024 and spend the increased fiscal funds mainly on smaller enterprises, rather than on public investment.

When addressing the annual convention of the China Wealth Management 50 Forum in December in Shenzhen, Guangdong province, he said the increase in fiscal deficits should be mainly used to provide temporary subsidies on rent, utilities and employment for downstream enterprises in the manufacturing industry and small and micro-sized companies.

In addition, China needs to continue to carry out tax cuts and fee reductions for small and microsized enterprises, and local governments can "moderately" increase their fiscal deficits to repay government debt owed to construction companies, thereby improving government credibility, boosting market confidence and expanding private investment, he said.

In recent years, China has been stepping up efforts to accelerate the construction of a modernized industrial system, support expansion of domestic demand and implement the strategy for invigorating the country through science and education.

Chang Haizhong, executive director of corporates at ratings agency Fitch Bohua, said he expects China's fiscal policy in 2024 to be more positively expansionary, with increased expenditures tilted toward major national strategic projects and people's livelihood.

"The intensity of fiscal tax cuts and fee reductions will likely be higher than in 2023. It is expected that incremental policies will be introduced, and technological innovation and the manufacturing industry, which are given priority support, will benefit the most," Chang said.

Industries with overcapacity will likely face pressure with the deepening of supply-side structural reforms and will have limited access to tax cuts and fee reductions, he added.

Luo, with Yuekai Securities, said that China is expected to further promote consumption-driven economic growth, facilitate high-tech industry development and seek breakthroughs in key areas and core technologies.

Beijing Yisheng Biotechnology Co, an innovative medicine developer, praised government support for innovation-oriented enterprises. Since its establishment more than two years ago, the company has received more than 10 million yuan in local government funds, including 1.5 million yuan for the construction of a research and development center in the Chinese capital.