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China is intensifying efforts to consolidate and build on the ongoing economic recovery and will likely see the rebound accelerating from the second quarter of this year, economists said.
"China will emerge from COVID-19 and rebound strongly from the second quarter," said Liu Jing, an economist at HSBC.
Economic rebound will be a key macro theme for China throughout 2023 and 2024. China's GDP will grow 5 percent this year and 5.8 percent next year, if current forecasts pan out as expected, HSBC said.
"Consumption has been a laggard so far but a recovery to the pre-pandemic growth level of 8 percent is expected in 2023. We expect to see strong pent-up demand for activities and consumption, which previously faced restrictions. The economic recovery should boost incomes and improve the consumption outlook, while households can also draw on the 6.6 trillion yuan ($974.7 billion) in excess savings accrued over the past three years," Liu said.
After the important policy pivot in November, several measures have been rolled out at the central government level to channel funding to property developers, while local governments are lifting purchase restrictions to stimulate demand. Once China emerges from COVID-19, the impact of this policy support will be visible, and a modest rebound in the housing sector is expected in 2023, she said.
Liu Linan, managing director and head of China macro strategy at Deutsche Bank, said: "This year is the first year of China's 'reopening' (after three years of COVID-related restrictions). We believe the steadiness and pace of economic growth will further pick up next year."
The relaxation of COVID-19 control measures and adjustments to real estate policies are essential to ensure that China's economic growth will return to normal. There is still room to further adjust mortgage rates and down payments for first-time homebuyers, said Liu Linan.
"If further progress is made in terms of consolidation of China's real estate sector, property developers' debt restructuring and bank loans for acquisitions of quality property projects, it will be conducive to boosting recovery of the sector and restoring market confidence," she said.
In order to bolster the economy, China's central bank may cut the reserve requirement ratio for banks once or twice this year. It is also expected to use structural monetary policy instruments to support China's medium- and long-term development strategies, such as technological innovation and green development, and help small and medium-sized enterprises improve their employment and business conditions, she said.
Yu Xiangrong, China chief economist at Citigroup, said with the release of COVID-19 restrictions and the opening of a fresh policy cycle, the Chinese economy will look forward to a new start in 2023.
Citi economists predicted China's GDP, led by domestic demand, will achieve a natural recovery and grow 5.3 percent this year. The driving force for growth will mainly come from two aspects.
First, the catch-up effect of consumption and the services sector. If the pandemic situation stabilizes, consumption and services will recover substantially beginning in the second quarter. The excess savings accumulated by China's household sector during the pandemic will gradually be converted into purchasing power after reopening, Yu said.
Second is property stabilization. Policies supportive of real estate have continued to increase or see accelerated implementation. Once the COVID-19 situation stabilizes, new and old policy measures will have a positive bearing on property sales and investment. This is a necessary condition for stabilizing growth and investment, he said.
Darius Tang, associate director of corporates at Fitch Bohua, a wholly owned subsidiary of Fitch Ratings, said infrastructure investment and consumption are key if China is to achieve the goal of stable growth.
Boosting consumer confidence and stimulating spending will be the highlights of the government's work plan this year, and consumption is the most important factor that will determine the path of China's economic recovery in 2023, Tang said.
The easing of COVID-19 control measures will have positive significance in terms of raising the consumption expectations or enriching the consumption scenarios, he said.
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Above article is from China Daily