Results-based investment preferred

No drastic stimulus moves seen on horizon for stabilizing GDP growth

China will take steps to expand targeted and effective investment while ruling out a deluge of strong stimulus policies, the country's top economic regulator said on Wednesday.

The National Development and Reform Commission said the move will help reinvigorate various enterprises, prevent a new round of repetitive construction and overcapacity, and promote high-quality development.

To stabilize the overall economy, local governments are required to intensify preliminary work on key projects mapped out in the 14th Five-Year Plan (2021-25) and major industrial projects in key regional strategic plans. And more efforts are also needed to launch those projects as soon as possible, the NDRC said in a statement posted on its official website.

The NDRC said it will continue to optimize the investment environment and promote steady growth of investment in key industry areas.

The new move came after the NDRC and 11 other central departments on Friday jointly released a policy document to promote steady growth of investment in industry, reiterating the goal of stabilizing the overall economy.

On Tuesday, the NDRC and the Ministry of Industry and Information Technology held a teleconference on promoting the steady growth of the industrial economy.

The meeting stressed that China maintained steady industrial growth in 2021, marking a good start for the 14th Five-Year Plan period. It has demonstrated the Chinese economy's strong resilience and broad prospects.

Amid a more complicated external environment and multiple pressures from shrinking demand, supply shocks and weakening expectations, the meeting called for more efforts to implement policies to ease pressure on enterprises, expand targeted and effective investment, maintain the stability of industrial and supply chains and strengthen risk monitoring and management.

Li Quan, chief economist at LC Securities, said while China's economic growth may slow in the first quarter due to the high base last year, the fundamentals of long-term economic development remain unchanged.

Li, who is also a finance professor at Nankai University, expects policymakers will take more steps to shore up growth this year. He said the government should focus on stabilizing employment and expectations, which will help spur consumption, effectively expand domestic demand and stimulate the vitality of market entities.

Luo Zhiheng, chief economist at Yuekai Securities, believes China's economy will gradually return to normal after its economy was severely disrupted by the COVID-19 pandemic in 2020 and 2021.

Luo expects a V-shaped recovery in 2022, with second-quarter GDP growth marking a nadir in full-year performance, saying the economy will gradually stabilize in the second half.

He said consumption and investment in manufacturing and new infrastructure will become key driving forces to spur the economy this year. And the development of new energy, new infrastructure, high-tech manufacturing, and small and medium-sized enterprises that specialize in niche sectors will create new growth points and inject new impetus into the economy.

Liu Kun, China's finance minister, said at a recent news conference that fiscal policies have already been loaded in advance to face the challenge of downward pressure. Among the 1.46 trillion yuan ($231 billion) earmarked to be raised from special local government bonds, some 484.4 billion yuan has already been released in January.

Bond proceeds were mostly spent on key areas like infrastructure facilities related to transportation, city planning, industrial parks and on improving affordable housing facilities.