China expected to exceed economic target

Nation to maintain continuity, stability and sustainability of its macro policy

Despite the threats posed by COVID-19 variants and supply constraints, China is on track to achieve economic growth well above its target this year with a controllable inflation level, officials and experts said.

Vice-Premier Liu He said China's economy has continuously recovered this year and its full-year GDP growth is projected to exceed the expected target.

Indicators of growth, employment, prices and international payments have overall remained at a normal level since the beginning of the year, Liu said on Tuesday while addressing the Hamburg Summit via a video link.

China's annual economic growth target was set at above 6 percent this year. Having grown by 9.8 percent year-on-year in the first three quarters of the year, the world's second-largest economy is expected to achieve about 8 percent GDP growth for the whole year, experts said.

Kang Yong, chief economist at KPMG China, said the strong export growth had driven a continuous recovery in industrial production and manufacturing investment.

"Despite the emergence of the Omicron variant, we kept our forecasts of China's GDP growth for this year and the next unchanged. It has been within expectation that new variants would appear as long as the coronavirus is yet to get controlled everywhere in the world," Kang said.

Unless Omicron is proven to be significantly more contagious than the Delta variant, its economic impact should be smaller than the latter as vaccination rates have increased while the world has got more experienced in coping with the pandemic, Kang said.

"I don't think the Chinese economy is facing stagflation," Kang added, stating that consumer inflation has remained mild while the spike in industrial goods prices has started to soften with the recovering supply of electricity and commodities.

As the tight supply of power eased in November, production in the manufacturing sector has returned to expansion last month, while the rise in input costs facing the sector has slowed significantly, said a survey released on Wednesday by media group Caixin.

Looking ahead to next year, the vice-premier said that China will maintain the continuity, stability and sustainability of its macro policy, make more efforts to vitalize micro entities, and provide a better development environment for small and medium-sized enterprises and foreign businesses.

His remarks came as the market is awaiting clues about China's economic policy agenda for the next year from the Central Economic Work Conference, a tone-setting meeting that usually takes place in December.

Hu Yifan, head of macroeconomics for Asia-Pacific with UBS Global Wealth Management, said Liu's remarks signaled that the Chinese government may moderately ease macro policy in the coming year to avoid any sharp economic slowdown, but aggressive stimulus measures will be unlikely given the emphasis on policy stability.

Meanwhile, the government is expected to remain committed to its long-term structural adjustment agenda and will continue to support key areas such as technological innovation and social welfare, she said.

Specifically, China's central bank is likely to cut the reserve requirement ratio, which refers to the proportion of deposits that banks must reserve and not loan out, by the Spring Festival holiday, which will start at the end of January, according to Hu.

Meanwhile, considerable fiscal spending is likely to be directed next year into areas such as high-end manufacturing, green investment and smart infrastructure, Hu said.

With accelerated infrastructure investment and stronger consumption to buffer slowing property development, China's economy may grow by about 5.4 percent next year, a steady level compared with this year after factoring in the impact of last year's super-low base, she added.

Li Xiang contributed to this story.