China says will keep policy support for economic recovery, no abrupt shift

FILE PHOTO: Men stand on a balcony overlooking the central business district in Beijing
FILE PHOTO: Men stand on a balcony overlooking the central business district in Beijing, China December 15, 2020. REUTERS/Thomas Peter

December 18, 2020

By Lusha Zhang and Kevin Yao

BEIJING (Reuters) -China will maintain policy support for its economic recovery, avoiding a sudden shift in policy, to help keep economic growth within a reasonable range in 2021, the Xinhua news agency said on Friday, after a meeting of top leaders ended.

The annual Central Economic Work Conference, a gathering of top leaders and policymakers to chart the economy’s course in 2021, is being watched by investors amid speculation that Beijing would make policy changes amid accelerating growth, following a virus-induced slump earlier this year.

China will maintain its proactive fiscal policy and make monetary policy flexible and targeted, Xinhua said, citing a statement issued after the closed-door meeting, which was held from Dec. 16 to 18.

“Next year, we should maintain continuity, stability and sustainability of macro policies. We should continue to implement a proactive fiscal policy and a prudent monetary policy, and maintain the necessary support for the economic recovery,” Xinhua said.

“Policy operations should be more accurate and effective, and there should be no sudden turn.”

The central bank has rolled out a raft of measures since February to support the virus-jolted economy, but analysts say it has shifted to a steadier stance as the economy recovers.

Beijing has been relying heavily on fiscal stimulus to weather the downturn, cutting taxes and allowing local governments to issue more bonds to fund infrastructure projects.

Fiscal policy should become more efficient and sustainable next year, support China’s major strategic projects and tech innovation, and speed up economic restructuring, Xinhua said.

Top leaders also pledged to maintain supply-side reforms while paying attention to demand-side management under the country’s “dual circulation” strategy, according to Xinhua.

China has unveiled a “dual circulation” strategy for the next phase of economic development in which it will rely mainly on “domestic circulation” – the internal cycle of production, distribution, and consumption, supported by innovation and upgrades in the economy.

China’s move to step up its anti-trust efforts will help promote higher quality development, Xinhua said.

While reiterating China will stick to its principle of “homes are for living in, not for speculation”, top leaders pledged to focus on the development of rental housing markets to help solve housing problem in big cities, Xinhua said.

China will explore ways to increase land supply for rental housing and make appropriate adjustment to rentals, according to Xinhua.

China’s economic growth looks to be accelerating in the fourth quarter from 4.9% in the third, driven by stronger demand, credit growth and stimulus measures expected to provide a strong tailwind into 2021.

China’s economy is expected to grow 2.1% this year, the only major economy to expand – although at its slowest since 1976 – then surge by 8.4% in 2021, a Reuters poll showed.

The coming year will be the start of the 14th five-year plan, which is vital for China to bypass the “middle income trap”. It will also be the 100th anniversary of the founding of the Chinese Communist Party.

(Reporting by Lusha Zhang and Kevin Yao; editing by Alex Richardson, Larry King)