Consensus emerging on 5-6% GDP expansion, easing in fiscal policy

China will be able to achieve around 5.5 percent GDP growth this year, and it has room for making macroeconomic policy adjustments to support the economy, experts said on Friday.

Zhu Guangyao, former vice-minister of finance, told a news briefing in Beijing that the economy's potential growth rate will likely be between 5 percent and 6 percent.

He said more efforts should be made to expand the economy to its full potential and maintain healthy and sustainable growth this year.

Citing the World Bank and International Monetary Fund forecasts for this year, Zhu said the United States and China, the world's two largest economies, will provide the main driving force to support global growth.

The World Bank forecast that global growth will likely decelerate markedly to 4.1 percent this year from an estimated rebound to 5.5 percent in 2021.

The World Bank expects China's GDP growth rate to reach 5.1 percent this year, closer to its potential sustainable growth rate of output at full capacity.

Zhu spoke highly of the Chinese GDP's substantial 8.1 percent growth in 2021, which brought the two-year (2020 and 2021) average annual economic growth to 5.1 percent. China will maintain sustainable growth this year, he said.

Li Yang, chairman of the National Institution for Finance and Development, said China has room for increasing fiscal or monetary support for the economy.

According to him, China's monetary policy still has certain room for maneuver compared with some advanced economies, and it also has room for ramping up fiscal policy support for the economy.

Citing the recent interest rate cuts, he said China has the capabilities and willingness to increase policy support for the economy this year.

For the first time since April 2020, the People's Bank of China, the nation's central bank, on Jan 17 lowered the interest rate of the one-year medium-term lending facility, a key policy rate, by 10 basis points to 2.85 percent in order to reduce corporate financing costs.

Louis Kuijs, head of Asia Economics of Oxford Economics, a think tank, said the recent change in tone of top government officials and in policy statements, which emphasizes the need to stabilize growth, supports OE's view that more policy easing is on the way.

"We expect monetary relaxation via ample liquidity in the interbank market and robust credit growth in the coming months," he said. "On the fiscal front, we expect the government to ease its stance, mainly by speeding up the issuance and use of local government bonds and accelerating project approvals, consistent with our forecast for real infrastructure investment growth to pick up in 2022."