Strong policy support, low comparison base spur optimism among governments

Local governments in China are setting annual growth targets of above 5 percent this year, mapping out their economic blueprints amid expectations of a notable rebound.

Experts said that several cities are targeting faster growth as policymakers are adopting a more pro-growth stance, which will significantly boost market confidence and expectations amid headwinds and uncertainties.

They voiced optimism for a robust 2023 due to the implementation of optimized COVID-19 response measures, stronger policy support and a low comparison base, adding that the growth targets set by local governments point to modest national goals this year.

Guangzhou in Guangdong province and Suzhou in Jiangsu province aim to respectively expand their economies by "above 6 percent" and "around 5 percent", according to government work reports released over the weekend.

Guangzhou will mainly focus on boosting the development of the manufacturing sector this year, accelerating the building of a modern industrial system and expanding demand. Suzhou will give priority to the development of the real economy and to promoting the integrated and clustered development of innovative industries.

Amid expectations of a rebound, many second- and third-tier cities have also set their annual growth targets at above 5.5 percent.

Zhou Maohua, an analyst at China Everbright Bank, said the growth targets of above 5 percent are in line with China's middle- to long-term potential growth rate, pointing to strengthened business confidence and improved expectations.

To rebalance the growth, Zhou said that accelerating the recovery of the domestic demand and strengthening the coordination among fiscal, monetary and other policies will hold the key to an economic rebound this year.

"China's economy will likely pick up notably due to the low comparison base and the optimization of COVID-19 control measures," said Feng Jianlin, chief economist at Beijing FOST Economic Consulting Co Ltd.

He said that several cities have pledged efforts to expand the domestic demand, promote industrial upgrades, boost technological innovation and increase support for the private-sector economy, sending positive signals for a robust 2023.

Feng, however, warned of risks and challenges ahead, including a weak property market and slowing external demand, saying more efforts should be made to stabilize the real estate market and increase support for the private sector and foreign trade enterprises.

Despite the shocks of the COVID-19 pandemic, experts said, China's economy still enjoys strong resilience and vitality with positives in some indicators. For example, China's foreign exchange reserves rose for the third straight month to $3.13 trillion by the end of last year, up 0.33 percent compared with November, according to the State Administration of Foreign Exchange.

Wen Bin, chief economist at China Minsheng Bank, attributed the rise in foreign exchange reserves to a weaker US dollar and improvements in China's balance of payments as more foreign capital flowed into the country's financial markets in anticipation of its economic recovery.

Zhao Chenxin, deputy head of the National Development and Reform Commission, said that China's economy will likely witness an overall recovery this year with supportive policy measures gradually taking effect.

China will work to give full play to the basic role of consumption and the key role of investment this year, while it will also continue to support the growth of the private sector and encourage the participation of private enterprises in major national strategic projects, Zhao said in a recent interview with Xinhua News Agency.

To spur domestic demand, Guo Shuqing, Party secretary of the People's Bank of China, the country's central bank, said that China's financial policy will focus on improving the income level of vulnerable groups while stepping up support for private enterprises.