Experts: Policy flexibility welcome phenomenon amid multiple challenges

China will step up macroeconomic policy adjustments and mull new incremental tools in a bid to keep economic performance within a reasonable range, the Ministry of Finance said on Tuesday.

Experts said the move comes as China grapples with disruptions from recent domestic COVID-19 resurgences since July and extreme weather in parts of the country.

They said China still has room for further policy stimulus in the second half, and they expect more efforts to spur consumption, speed up the construction and realization of infrastructure projects and stabilize the real estate market over the following months.

The ministry said it will consider new incremental policy tools, make such arrangements in advance and speed up related efforts in a timely manner.

The ministry said that in the second half, it will further push for implementing stimulus packages aimed at stabilizing growth, actively expand demand, consolidate recovery momentum and stabilize employment and prices, striving to achieve the best possible results.

China will further strengthen cooperation between fiscal and monetary policies and support the implementation of policy-backed and developmental financial tools, aiming to further boost effective demand, create more jobs and spur consumption, the ministry added.

More efforts will also be made to support funding for key fields such as core technologies and enterprise spending on research and development and renewables, as well as ensure basic livelihoods for unemployed and low-income groups.

Citing the latest July data, experts said China's economy has slowed amid insufficient domestic demand and weakening expectations, and renewed COVID-19 outbreaks and high temperatures and drought in southern China have continued to disrupt power supply as well as industrial and agricultural production in August.

Feng Jianlin, chief economist at Beijing FOST Economic Consulting Co Ltd, warned of COVID-19 challenges, structural problems and troubles in the property market, saying it is necessary for the government to continuously carry out market-oriented reforms, increase support for private businesses and accelerate digital economy development.

In terms of fiscal policy, Feng said he expects more stimulus to spur consumption and improve livelihoods.

A recent executive meeting of the State Council chaired byPremier Li Keqiang decided that China will adopt follow-up policies on top of the main policy package to stabilize the economy, including an incremental quota of at least 300 billion yuan ($43.4 billion) in policy bank financing tools, a new quota of over 500 billion yuan in local government special bonds to be fulfilled before the end of October and 200 billion yuan in new bonds to be issued by central government-owned power firms.

Ye Yindan, a researcher with the Bank of China Research Institute, said the government aims to speed up the recovery of demand, stabilize overall growth and promote employment stability, adding the new measures will help expand effective investment, accelerate the push for infrastructure construction and ensure stable power supplies and prices.

Citing the new moves mapped out during the meeting, Ye said he expects to see new issuances of local government special bonds in the second half.

Despite headwinds, Ye said, China's economy may gradually stabilize with a package of stimulus policies taking effect.