China's latest stimulus measures seem to create a favorable shift in focus toward relying more on boosting consumer confidence as a sustainable growth driver, with bigger fiscal spending on improving social welfare and addressing property woes necessary, said leading economists at home and abroad.
Referring to China's key choices of continuing export-led growth policies or shifting the growth engine to consumers, Kristalina Georgieva, managing director of the International Monetary Fund, said, "As the Chinese economy has grown so big, it is the latter — domestic consumption — that is the reliable source of growth."
"In the short term, one big obstacle to consumer confidence is in the property sector, and a decisive action to resolve that would help lift up consumer confidence," she said at a news conference on Thursday.
China's social security and pension reform will have the potential to boost domestic consumption by giving people the confidence that they don't need to save excessively, she said, adding that she believes policymakers are looking into the above choices.
Cao Jing, an associate researcher with the Institute of Finance and Banking, at the Chinese Academy of Social Sciences, told China Daily that the government should issue additional special treasury bonds to increase fiscal spending on social welfare sectors, including elderly care, childcare, education, healthcare and affordable housing.
"That will help encourage the consumers, especially the middle-income groups, to spend freely without worrying," Cao said, as the broader economy is still facing challenges from lackluster domestic demand.
The market is closely watching China's next big step to reinvigorate its economy, as the Standing Committee of the National People's Congress, the country's top legislature, will convene from Nov 4 to 8.
The meeting is widely expected to unveil details of the country's fiscal stimulus package, including the swap program of local government implicit debt, as well as potential increases in government deficit and treasury bond issuance to ramp up spending.
Huang Hanquan, head of the Chinese Academy of Macroeconomic Research, which is affiliated with the National Development and Reform Commission, said that China still has huge potential to further boost consumption given the potential growth in spending on services, especially education, elderly care, healthcare, sports and entertainment.
In late September, the Political Bureau of the Communist Party of China Central Committee called for integrating efforts to boost consumption and improve people's well-being. Policymakers stepped up efforts thereafter to shore up the property and stock markets, reviving people's consumption power and willingness, while promoting trade-in deals for consumer goods.
Gong Liutang, a professor of applied economics at Peking University, said that compared with the 2008 stimulus program, the latest round of policy buffer should focus more on unleashing consumption potential and preventing resource misallocation.
Calling for more subsidies for low-income and unemployed individuals, Gong, a member of the 14th National Committee of the Chinese People's Political Consultative Conference, also suggested effectively tackling the property downturn by intensifying central government funding to establish a special fund to acquire idle housing inventory for rental purposes.
The sharpened focus on consumption came amid geopolitical uncertainties and trade tensions. Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said the IMF's analysis shows that, in the long run, trade fragmentation will hurt everyone as global demand drops.
On Tuesday, the IMF's World Economic Outlook projected that China's GDP will grow 4.8 percent in 2024, down 0.2 percentage point from its July forecast, citing real estate weakness and low consumer confidence.
The growth forecast for 2025 was unchanged at 4.5 percent, the same as the July forecast, the report said, adding that recent policy measures may provide upside potential to near-term growth.
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