Effective policy to drive the economy forward

China’s economy is on track for a sustained recovery in the second half, given effective policy stimulus measures and new growth drivers, economists and executives said.

However, the basis for economic stabilization is not yet strong amid weak domestic demand, still weak expectations and a troubled property sector, they said, and they expect increased monetary and fiscal support, including further cuts in the reserve ratio. mandatory and interest rates. .

Their comments came after mixed economic data for June. Caixin China’s general manufacturing purchasing managers’ index rose to 51.8 in June from 51.7 in May, the highest level since May 2021, indicating continued improvement in the sector, media group Caixin said on Monday.

However, the National Bureau of Statistics said on Sunday that the official purchasing managers’ index for the manufacturing sector stood at 49.5 in June, unchanged from May, and still below the 50-point mark that separates growth from contraction.

The official non-manufacturing PMI, which includes sub-indices for services and construction, came in at 50.5 in June amid continued property declines, up from 51.1 in May.

“China’s overall economy continued an expansion trend, but the foundation for sustained recovery and improvement still needs to be strengthened,” said Zhao Qinghe, an NBS statistician.

The pressures of low price growth and weak demand continued with NBS data showing that the sub-index of factory production sector prices fell into contractionary territory to 47.9 in June, from 50.4 in May.

To ease the fall in 10-year Treasury bond yields amid low inflation, the People’s Bank of China, the country’s central bank, said on Monday it will borrow Treasuries from major dealers – a move that experts said it signals that the PBOC may sell long-term Treasuries soon. Selling bonds essentially leads to falling prices and rising yields.

Experts said the central bank may take more direct measures to support the economy in the third quarter, after pledging to focus more on taking measures to ease cyclical downward economic pressure at a meeting last week.

Hu Yifan, head of macroeconomics for Asia-Pacific at UBS Global Wealth Management, said the PBOC could further cut RRR – or the percentage of cash banks must hold as reserves – and interest rates for the remainder of the year to address low inflation. Also, low-cost lending facilities are likely to be targeted to support the purchase of housing inventory.

The NBS also said the PMI for high-tech manufacturing stood at 52.3, up from 50.7 last month, remaining in expansion territory for the eighth straight month.

Sun Xuegong, director-general of the department of policy research and consultation at the Chinese Academy of Macroeconomic Research, said the data show an obvious characteristic of China’s economy – the transition of growth drivers.

“On the one hand, we see old leaders such as real estate underperforming, which has yet to come out of its downward spiral. On the other hand, we see new quality manufacturing forces flourishing, for example, high-tech manufacturing is growing by double digits,” Sun said.

“The first half of this year will see about 5 percent economic growth. China remains on track to meet its annual target (about 5 percent).

Joe Ngai, chairman of management consultancy McKinsey China, expressed strong confidence in China’s economic growth prospects and expects China’s economic growth to be close to 5 percent this year.

Meanwhile, he said rising household savings indicated weak domestic demand amid still-weak confidence and property woes, adding that more efforts needed to be made to fuel appetite for spending on products and services and boost confidence. of consumers.