Consumption, healthy SMEs vital for 2021 growth

China's growth prospects for this year will hinge largely on the continuation of policies to boost consumption and the better recovery of small and medium-sized enterprises, experts said.

Chen Changsheng, director-general of the department of macroeconomic research at the Development Research Center of the State Council, said in a recent interview that China could achieve its economic growth targets for last year due to the prompt actions taken to contain the COVID-19 pandemic and its market-friendly policies.

"Last year, the central government rolled out relief measures of a sizable scale to help businesses and households cushion the economic effect of the pandemic. In retrospect, the intensity of such policies has been adequate and robust, with the economy recovering rapidly," Chen said.

The central government issued several innovative fiscal and monetary policies to help businesses and households since COVID-19. These include a special transfer mechanism designed to channel incremental fiscal funds straight to county-level governments, and the extension of repayments for inclusive loans and credit support programs to help small businesses.

"These newly developed mechanisms have effectively energized the market players, particularly the small and private firms, and made businesses hum again," Chen said.

He said that despite the COVID-19 epidemic, there was no decline in the number of market participants while the number of new businesses kept growing. There are more than 100 million market entities in the economy, with the majority being SMEs, accounting for over 80 percent of the total jobs in the country.

China's private business sector is burgeoning largely due to the country's consistent reform efforts, Chen said. The country made enormous efforts to boost globalization and opening-up last year, including the signing of the Regional Comprehensive Economic Partnership agreement among 15 participating countries, completing negotiations on the EU-China Comprehensive Agreement on Investment, releasing a master plan for the Hainan Free Trade Port and shortening the negative list for foreign investment, and so on.

He said that China's resolute efforts and achievements in effectively containing COVID-19 have ensured a speedy economic recovery, but also contributed substantially to ensuring the stability of global supply chains.

The Central Economic Work Conference in December said China will strive to keep its economic fundamentals within a proper range, and pledged to maintain its policy support for the economy with no major policy shifts.

"The direct-benefit policies introduced in 2020 helped cope with the unusual difficulties. As the economic landscape evolves, macroeconomic policies are supposed to adjust accordingly, and we may see a gradual winding down of the relief measures this year," Chen said. "It's important to see how the business community performs after the winding down of the policies."

Growth prospects will also hinge on the speedy recovery of small and micro businesses and a steady increase in consumption.

Figures announced by the National Bureau of Statistics on Jan 18 suggest that domestic consumption continued to gather pace in 2020, accounting for 54.3 percent of the country's GDP in 2020. Ning Jizhe, head of the NBS, said while releasing the data that consumption is playing an increasingly significant role in spurring economic growth, and the effective containment measures will lead to a gradual strengthening of the (pent-up) consumer demand.

"Consumption, particularly that of services, decreased last year due to the pandemic-induced restrictions. Unlike the recovery in investment and production, which could be restored after delays, some of the lost consumption might be never restored." Chen said. "With COVID-19 vaccines being rolled out, consumption demand is likely to strengthen further. This is the time when more policies for boosting consumption are in the pipeline."