China makes efforts to sustain economic recovery in H2

With COVID-19 outbreaks waning and pro-growth policies taking effect, China is making multi-pronged efforts to continue its recovery trend in the second half (H2) of this year.

The economy has come under strain from COVID-19 resurgences and global geopolitical conflicts since March. To help it navigate the trough, multiple supportive moves ranging from bolstering market entities to spurring domestic demand have been taken by the country's policymakers.

Thanks to the efforts, the latest data has pointed to upticks of key indicators. For instance, the purchasing managers' index for China's manufacturing sector, which measures the country's factory activity, came in at 50.2 in June, returning to the expansion territory.

China's economic operation has been through an unusual journey since the start of this year, said Premier Li Keqiang at a symposium this week. Generally speaking, the economy is seeing a hard-fought recovery based on the implementation of a raft of economy-stabilizing policies, he said.

The premier also stressed that the foundation for recovery is still unstable and called for more hard work to stabilize the economy.

Specifying the priorities for the mid-year economic work, Li noted that China's 160-million market entities are where economic resilience comes from and are vital to the country's employment and overall economic operation. He called for more measures to revitalize market entities, particularly micro, small and medium-sized enterprises and self-employed individuals.

Toward this end, the State Council, or China's cabinet, has recently launched inspections in 12 provincial-level regions over government work concerning market entities and employment. Inspection reports showed that the majority of these regions have unveiled supportive measures that have effectively boosted market confidence.

In late June, state organs including the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation announced a campaign to toughen a crackdown on irregular fee charges. This is part of the efforts to ease the burden on companies in sectors such as logistics, finance, and energy.

To further shore up market entities, the country has recently expanded the coverage of VAT refunds to companies in seven more sectors, including wholesale and retail sales, agriculture, accommodation, and catering. This move will bring the total amount of tax refunds and reductions to 2.64 trillion yuan (about 393 billion U.S. dollars) this year.

As part of the efforts to drive domestic demand, Ou Hong, an NDRC official, told a recent press conference that priorities will be given to projects such as water conservancy and transportation, as well as the implementation of policies aimed at spurring the consumption of automobiles and home appliances.

Amid the infrastructure drive, the country is allocating in advance the local government special bonds to catalyze investment in infrastructure construction. By the end of May, over 2 trillion yuan of such bonds have been issued nationwide, accounting for 59 percent of this year's quota.

Fresh move in this regard came earlier this week, as the central bank announced that it will support two policy banks to raise up to 300 billion yuan via financial bond issuance to fund the country's major projects.

On the local level, governments are handing out billions of yuan in shopping vouchers and subsidies to shore up local spending. A case in point is the central city of Zhengzhou, which has announced a massive voucher giveaway worth 240 million yuan from late May to August.

Looking ahead, Ou said that the economic planner will enrich and improve its policy toolkits on a regular basis and roll out measures as appropriate to get prepared for more challenging headwinds.

"We have full confidence in overcoming difficulties and challenges, and we are capable of coping with all kinds of unexpected changes to ensure healthy, sound, and sustainable economic development," Ou said.