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China’s economy posted a recovery growth in Q2 of the year driven by the dividend of post-pandemic recovery, front-loaded policy measures and low-base effect, however, given the weak endogenous growth momentum, insufficient effective demand and unstalbe market expectations, the recovery momentum has weakened, according to a report released by the Institute of Finance at the Chinese Academy of Social Sciences, a top state think tank.
Considering the slowdown in the recovery momentum and the low base last year, China’s GDP growth in Q2 will likely reach about 7% year-on-year, but the quarter-on-quarter growth is likely to be lower than Q1, it said.
As the government steps up the policy measures for expanding domestic demand and improving expectations, China’s full-year GDP growth is expected to be around 5.5%, it estimated.
At the moment, the top priority for the government should be stepping up counter-cyclical adjustment, “opening the fiscal, monetary and real estate policy toolkits even wider” and lift market expectation and confidence with effective measures, it said.
In the short term, the central government should appropriately increase leverage and fiscal deficit, the PBOC should further cut interest rates substantially, and meanwhile, the government should step up the support for quality privately-owned property developers, it said.