Timely steps to drive consumption, heal biz stress

China's prompt policy interventions to alleviate the burden of enterprises and unleash consumption are likely to underpin growth going forward and result in more jobs, officials and experts said.

The country will work harder to implement a raft of supportive measures to boost consumption, enable the construction of major projects, and expedite the development of a modern industrial system to boost growth, Meng Wei, a spokeswoman for the National Development and Reform Commission, said during a news briefing on Friday.

"While economic figures for May have attracted market attention, we believe that even though temporary fluctuations in certain sectors have emerged, the momentum of China's economic recovery remains strong and solid," she said.

The National Bureau of Statistics said on Thursday that industrial output grew 3.5 percent in May from a year earlier, slower than the 5.6 percent expansion in April. Year-on-year growth in fixed-asset investment and retail sales also both slowed from the previous month.

Noting the current insufficient market demand and the need for a stronger internal driver for economic recovery, Meng said such pressures and challenges will not change the positive momentum of China's long-term economic growth.

China recently put in place policy steps to help businesses, such as lowering financing costs by cutting policy interest rates as well as preferential tax and fee reductions, which have impressed the markets.

These are widely being interpreted as an important shift toward a looser policy stance and are expected to help businesses and households at a challenging time for the country's economy.

Meng said the government will formulate policies quickly to energize, improve and unleash the potential of consumption.

Specifically, policy efforts will be made to stabilize automobile sales.

Efforts will also go into accelerating the development of a modern industrial system supported by the real economy, and in speeding up the implementation of the 102 major projects outlined in the 14th Five-Year Plan (2021-25). Government investment and policy incentives will be better utilized to guide and effectively catalyze private investment activity.

In addition, she said supportive measures will also be unveiled to secure employment and increase the incomes of urban and rural residents.

The jobs-first policy will be further guided and enhanced by expanding employment channels for college graduates. Income sources for urban and rural residents will be diversified and safeguarded, Meng said.

Expanding domestic demand and boosting consumption will be crucial for China's economic recovery this year, said Darius Tang, associate director of corporate at Fitch Bohua.

"While China's domestic demand is still weak, we expect the recent stimulus policies introduced by the government will lead to a demand rise, and have visible impact on residents' income and confidence," he said, adding that such a process may take time.

"In the face of a weak economic foundation, monetary policy stance has already begun shifting, as several policy interest rates have been lowered over the past several days," said Li Qilin, chief economist at Shanghai-based Hongta Securities. "Such reduction in policy rates will help lower banks' cost of liabilities, guiding loan interest rates downward and reducing burden on businesses. Looking ahead, coordinated efforts of fiscal and industrial policy are still expected to work in conjunction with the current easier monetary policy to collectively enhance economic recovery."