By JIANG XUEQING | China Daily | Updated: 2020-12-02

The Chinese economy is likely to witness normal growth next year, as the economic effect of the COVID-19 pandemic may diminish, and the government will continuously boost domestic demand, support innovative development and improve the business environment, experts said.

The BOC Research Institute, established by Bank of China Ltd, expects China's GDP to grow by around 7.5 percent on a yearly basis in 2021, up from around 2.1 percent expected this year.

Looking ahead, infrastructure and real estate investment will maintain rapid growth, promoting continuous economic recovery. It is estimated that fixed asset investment will increase by 6.5 percent next year－especially infrastructure investment in key projects and fields, including transport, energy and water projects, as well as investment in "new infrastructure" projects, such as 5G, big data centers and artificial intelligence. At the same time, investment in the manufacturing sector will continue to recover, and its growth may turn positive next year, said a report released by the BOC Research Institute on Monday.

With new infrastructure supporting the operational framework of industrial internet, China will usher in revolutionary innovations for the digital economy next year. Digital transformation will be widely used by various participants in economic activities. Moreover, digital technologies will become the cornerstone of upgrades of the quality of life and also drive the strong growth in demand, said Cheng Shi, chief economist at ICBC International.

China's plan for a new type of urbanization will generate higher consumer demand from a larger section of residents. As the focus of consumption upgrade shifts to lower-tier cities and towns, the room for growth will hopefully increase for a greater number of cost-effective domestic brands, Cheng said in a research note on Nov 20.

Total retail sales of consumer goods, which have become an important driver of economic growth, are estimated to increase by around 10 percent in 2021, compared with a projected decline of 4.4 percent this year, said the report from the BOC Research Institute.

"According to our estimates, the average annual growth rate of China's GDP will range from 5 percent to 6.1 percent over the next five years. In the future, fiscal policy will play an active role in boosting economic growth. The government will launch measures on a regular basis to ensure fiscal funds will directly benefit businesses and individuals," said Chen Weidong, director of the BOC Research Institute. Chen urged the government to focus on improving the local government bond issuance mechanism and optimizing the corporate structure.

The research institute expects total social financing to rise by 12 percent on a yearly basis in 2021, down from a projected increase of 13.5 percent this year.

"China should put more emphasis on its structured monetary policy to push for the financial sector to better serve the real economy, with a focus on providing funds－especially medium-to long-term funds－to support fixed asset investment, manufacturing investment, science and technology startup financing, and rural revitalization," Chen said.

He also reminded policymakers to pay close attention to problems that may occur in China's financial markets in 2021, such as the intense exposure of nonperforming assets, increased defaults in China's corporate bond market, and negative effects of a rapid appreciation of the renminbi on exports.