Boosting market confidence relies more on the endogenous driving force of the economy, according to a survey conducted by the Economic Observation Network. The survey included economists from investment banks, research institutions, and government departments, and found that 46% of economists believe that consumption, investment, and foreign trade are the key drivers of economic recovery. Additionally, 77% of economists predict that the fluctuation range of the RMB exchange rate in 2023 will be between 7.1-7.5, and 80% believe that debt risk will be an important consideration for economic recovery policies in the second half of the year.
The survey also addressed the possibility of China entering a “liquidity trap.” While signs of insufficient demand and unstable expectations exist, the survey found that China has not yet faced a liquidity trap. Guan Tao, the global chief economist of Bank of China Securities, stated that China’s nominal interest rates are still positive and demand is slowly improving, indicating that the country is not currently in a liquidity trap.
Despite ongoing discussions about the need for more policy stimulus, the survey suggests that the Chinese government is showing patience in introducing large-scale stimulus policies. The recent executive meeting of the State Council demonstrated a gradual deployment of measures to stabilize the economy, but the timing for extensive stimulus policies is not yet ripe. The survey identified several reasons for this approach, including the ongoing economic recovery, the possibility of reaching the economic growth target of around 5% this year, the need to pursue high-quality development, the fading effectiveness of macro stimulus, and the necessity of saving policy space for future challenges.
Furthermore, the survey highlighted the need for adjusting real estate policies at multiple levels based on the actual situation. Economist Lian Ping recommended guiding commercial banks to provide stable housing credit support for residents to meet the demand for first-home purchases.
Overall, the survey emphasizes the importance of strengthening the endogenous driving force of the economy to boost market confidence and ensure sustained economic recovery.