Yearender-Xinhua Insight: Six key areas to watch on China's economy 2017

Updated 2017-01-01 08:45:41 Xinhua

The Chinese economy has adapted to its "new normal" in 2016 amid rising concerns on GDP growth, supply-side structural reform, monetary policy, renminbi, and more. With the new year approaching, how will the economy fare in 2017? Here are six areas where experts call for close attention.

STABLE GROWTH

Despite remaining downward pressure, China's economic growth stabilized at 6.7 percent in the first three quarters of 2016, scotching rumors of a hard landing. In 2017, stabilizing the economy will still be prioritized by policymakers given the Communist Party of China will hold its 19th National Congress in Beijing during the second half of the year.

Economists predict a "soft landing" for China's economy, while noting that proactive fiscal policy will continue to play a positive role.

"China's steady growth will be guaranteed by both strong growth potential and effective macro-control policies," said Zhang Liqun, a researcher with the Development Research Center under the State Council.

In 2017, the growth of real estate investment and sales will slow, but the negative effect could be offset by infrastructure investment, said Robin Xing, chief China economist with Morgan Stanley.

SUPPLY-SIDE STRUCTURAL REFORM

China's Central Economic Work Conference has made "seeking progress while maintaining stability" the main theme for economic work in 2017, pledging to push for substantial progress in supply-side structural reform.

Economists believe China will improve its basic economic system and expedite reforms to delegate power, improve regulation and optimize services.

Yu Yongding, economist and former central bank adviser, stressed the importance of both supply-side structural reform and macro-control policies, saying China's stable growth may not be sustained without reforms, while the reforms will not be successful if they run out of control.

"Looking from a global perspective, China's advantage lies in its ample room for reforms," said Xing. In 2017, China is expected to launch fundamental reforms involving state-owned enterprises, taxation, finance, land, urbanization, social insurance, ecological civilization and the opening up policy.

PRUDENT MONETARY POLICY

China's monetary policy will be "prudent and neutral" in 2017, according to the Central Economic Work Conference.

Substantial monetary loosening is unlikely next year, while the focus of monetary policy may shift from supporting growth to preventing risks, economists said.

The central bank is expected to prefer tools such as reverse repos and medium-term lending facilities to ensure liquidity and avert excessive credit growth.

Huang Yiping, a central bank advisor, said China's monetary policy next year will be determined by the government's annual economic growth target, while expected rising inflation, higher U.S. interest rates and a weaker yuan will restrict room for loosening.

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