Lian Ping, Former Chief Economist of Bank of Communications and Chief Economist of ZhiXin Investment, remarked on Saturday that despite the huge downward pressure brought by the COVID-19 epidemic, China’s economy can still achieve medium growth rate this year with the annual GDP projected to increase 3.5-4.5% thanks to the effects of countercyclical adjustment policies.

According to data from the National Bureau of Statistics of China, China’s GDP suffered a YoY decrease of 6.8% in the first quarter of this year. Lian Ping said that albeit the great uncertainties, China may register an economic growth of 2-4% in the second quarter and 8-9% in the third and fourth quarters.

“Several positive factors may help China’s economy to achieve medium growth rate this year.” These factors include strengthened macro-policy counter-cyclical adjustment, accelerated infrastructure investment, real estate market recovery, and the excellent performances of financial and information industries in the first quarter.

Lian Ping pointed out that the power of macro policies “should not be underestimated.” He predicted that the fiscal deficit target in 2020 may increase significantly, reaching or exceeding 5%, compared with 2.8% last year; local government debt quota may raise to RMB 3.5-4 trillion, and special national bond quota may range from RMB 2-3 trillion.

Meanwhile, monetary policies will continue to ease with fiscal policies. Lian Ping forecast that the growth rate of broad currency M2 may rise to 10-12% this year, and social financing will increase by 13-14%. He said that the current monetary conditions and capital market development will help the financial industry to pick up pace in the next three quarters and the financial and information industries are likely to contribute a total of 1.2-1.5 percentage points to the annual economic growth.

The data released by the National Bureau of Statistics of China show that, in the first quarter of this year, the value added of the information transmission, software and information technology service industry recorded a YoY increase of 13.2%, and that of the financial industry grew by 6.0%. Against the backdrop of general decline in the traditional service industry, this become a highlight in the first quarter. Specifically, the financial industry accounted for 10% of GDP, up 2 percentage points from the previous year.

In terms of the real estate market, Lian Ping believed that in light of the downward pressure on the economy and market demand, the real estate policy is likely to undergo appropriate and reasonable adjustment in the future. Meanwhile, with the marketization of land resources forging ahead, land supplies in some cities are expected to increase significantly.

He believed that the growth rate of real estate investment nationwide is expected to be near zero in the second quarter (that in the first quarter was -7.7% year-on-year), and the annual investment growth rate may reach 7-10%. Under the main principle that “houses are built to be inhabited, not for speculation,” loose monetary policies are not likely to result in dramatic growth of house prices. House prices are projected to increase by less than 2% throughout the year.

Lian Ping also said that, in spite of the tremendous pressure brought by the novel coronavirus epidemic to China’s economy, it is still necessary for the government to set targets for annual economic operation. “Now some view that there is no need to set a target for GDP anymore, and we don’t agree. Without a target, there will be no evaluation criteria and we will lose our momentum.”

Source: Interface News