Coordinated policy support seen as key to ensuring that recovery is sustainable
China's economic growth is poised to gather pace in the remainder of the year with a slew of stimulus measures taking effect gradually, showcasing strong resilience and vitality amid downward pressures, according to economists and global executives.
Despite signs of stabilization, they said, China's broader economy still faces multiple pressures from insufficient demand, weak exports, low confidence within the private sector, and stress in the property sector. They added that this calls for coordinated fiscal and monetary policy support to bolster the world's second-largest economy.
Robin Xing, chief China economist at Morgan Stanley, said the economy had bottomed out, with the latest economic indicators posting better-than-expected results.
"China is on the path of a cyclical recovery," Xing told China Daily."There are a lot of green shoots (of recovery), but we need to be careful and not withdraw any policy support too early. We have to see more following through on the pace of policy, even stronger fiscal stimulus to make sure this recovery is sustainable."
Data from the National Bureau of Statistics showed the official snapshot of fresh signs pointing to a steady economic recovery. China's official manufacturing and nonmanufacturing purchasing managers indexes both improved in September to 50.2 and 51.7, respectively, from 49.7 and 51 in August. The figures were above the 50-point mark that separates contraction from growth.
Lu Ting, chief China economist at Nomura, said the better-than-expected September PMI data could be good for market sentiment in the short run, and some August data have already shown signs of stabilization.
China's pro-growth stance and the fresh signs of steady recovery have cheered investors and analysts. Some economists and banks have recently upgraded their forecasts for China's growth prospects for 2023.
Nomura recently raised its third-quarter and fourth-quarter GDP growth forecasts to 4.1 percent year-on-year and 4.3 percent, respectively, from 3.7 percent and 4 percent, and accordingly its full-year 2023 GDP growth forecast increases to 4.8 percent from 4.6 percent.
Oxford Economics has maintained its growth forecast for 2023 at 5.1 percent, above China's annual growth target of around 5 percent this year.
"We expect the economy to have reached a cyclical trough in July, and it should stabilize in the coming months, given the range of stimulus measures put in place," said Louise Loo, lead economist at Oxford Economics.
On the monetary policy side, Loo said her team expects a third round of cuts, of 10 basis points, across the key policy rates this year, alongside another 25-basis-point cut to the reserve requirement ratio at the quarter's end in December.
The People's Bank of China, the country's central bank, announced the second cut to the reserve requirement ratio by 0.25 percentage point in September, following a cut in March.
Global executives voiced strong optimism about China's economic prospects despite pressures and uncertainties amid a gloomy global outlook, reaffirming investment commitment to the China market.
"China has enormous potential for economic development and plenty of growth momentum," said Samson Khaou, executive vice-president for the Asia-Pacific region for software developer Dassault Systemes."Despite the impact of the pandemic, we have maintained double-digit business growth in the entire Asia-Pacific region in the past three years, with the biggest contribution coming from China."
Looking ahead, he said the Chinese economy will continue to go forward in the direction of high-quality development.
"This is a very important prerequisite for multinational corporations, giving us confidence in our development in the Chinese market," he added. "We will continue to increase our investment in the Chinese market, extend our coverage in various industries, and work with leading enterprises to create best industrial practices."
Sean Shan, senior vice-president of pharmaceutical company Takeda and president of Takeda China, said China is a strategically important market for Takeda.
"We are confident that fundamentals of the healthcare industry remain strong, and we are delighted to see the government accelerate the path to high-quality development of the China economy," he added.
Looking forward, he said innovation will lead to the high-quality development of the healthcare industry in China that is fully in line with Takeda's plan to make China its second-largest market globally by 2030.
Dong Minsheng, CEO of pharmaceutical company Menarini China, said: "We have witnessed the strong resilience and tremendous potential of China's economy since the beginning of this year. The long-term positive fundamentals remain unchanged, and Menarini's commitment to China remains unchanged."