Policy support driving V-shaped recovery in Q4, experts say

There are signs of a "V-shaped" recovery in the Chinese economy with a raft of policy support measures taking swift effect and more spending plans in the pipeline to consolidate the momentum, experts at national think tanks said.

"The combination of incremental policies is likely to forge a 'V-shaped' recovery of China's economy in the fourth quarter, which is anticipated to meet the annual targets," said Wu Sa, a senior researcher at the Chinese Academy of Macroeconomic Research, which is affiliated with the National Development and Reform Commission.

Nearly half of the incremental policy measures, which are aimed at addressing not only current difficulties but also resolving major long-term issues, have been implemented so far and a new batch will be introduced, Wu said on Monday at a media forum held by the China Public Diplomacy Association.

He said the upcoming policy measures will include maximizing the scope of investments eligible for special local government bond proceeds, expanding the proportion of special bonds usage as investment capital and increasing student financial aid while broadening its coverage.

As the latest step to expand investment, the Ministry of Finance said on Monday that it is formulating a work plan for the advance allocation of part of the local government debt quota for 2025.

Dong Shaopeng, an advisory committee member of the Securities Association of China, said that by advancing investment projects, the ongoing round of policy support aims to revitalize both demand and supply in the economy, which is a departure from being mainly focused on supply-side reforms as was the case in previous years.

With property support filtering through, China's property market is showing notable improvement, Dong said. "The real estate market is expected to return to a state of steady transactions soon, though this does not imply a resurgence of speculative trading."

Official data showed the year-on-year decline in sales revenue of newly-built commercial housing across the country for the first 10 months of the year came in at 20.9 percent, narrowing by 1.8 percentage points from the January-September period.

The local government debt resolution package worth 12 trillion yuan ($1.66 trillion) unveiled on Nov 8 is also being implemented rapidly. As of Monday, at least seven provinces and cities, including Zhejiang, Jiangsu, Guizhou and Henan, had disclosed plans to issue special bonds within this month to replace hidden debt.

Yang Zhiyong, president of the Chinese Academy of Fiscal Sciences, told China Daily that the 12 trillion yuan debt resolution package will effectively ease repayment pressures of local governments, allowing them to focus more on economic development and improving people's livelihood.

Yang added that there remains scope for China to expand debt raising and increase the deficit-to-GDP ratio in 2025 to strengthen fiscal support.

Dong, from the Securities Association of China, said: "China has the policy reserve to inject more fiscal spending, say, 5 trillion to 8 trillion yuan, next year. The actual decision will be contingent on market conditions then."