SOE reform, financial risk prevention seen as key issues
With the slowdown in China's economic growth in 2015, a lot of hope has been pinned to this year's annual meetings of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and the National People's Congress (NPC), which begin on Thursday and Saturday, respectively. Domestic media reports have already highlighted many of the key reforms and policies on the table at the meetings. Supply-side reform has dominated the media coverage as the government seeks to tackle the overcapacity problems in some State-run industries. Media reports also cited State-owned enterprise (SOE) reform and financial risk prevention as other major issues at the top of this year's agenda. [Special coverage]
China's GDP growth slowed to 6.9 percent in 2015, and the figure was not "easy" to reach due to the continuing downward pressure on the global economy, Xu Xianchun, deputy director of the National Bureau of Statistics (NBS), was quoted as saying in an article published on the NBS's website on Monday.
Xu also noted that there were consecutive gains in labor productivity and progress in industry restructuring.
However, the People's Bank of China (PBC), the country's central bank, announced later on Monday that it cut the reserve requirement ratio for commercial banks by 0.5 percentage points, a move to support economic growth while creating a "favorable" financial environment for supply-side reform, according to the PBC's website.
Decision-makers will continue to focus on reform by making suggestions such as increasing the fiscal deficit, raising infrastructure spending and easing rules on bank lending, Wang Tao, China economist at UBS Securities, was quoted as saying in media reports, the financial news website cs.com.cn reported on Monday.
"The government may raise the fiscal deficit target to 3 percent of GDP from 2.3 percent in 2015," she said.
By increasing government investment and cutting taxes, upcoming policies will definitely boost economic growth, Wang noted.
Monetary policy will also likely become more supportive, via injections of liquidity into the interbank market to help investment and projects, cs.com.cn noted. Volume of new yuan-denominated lending in the country in 2016 is expected to grow about 14 percent.
Analysts predicted that policymakers will elaborate on supply-side reforms during the upcoming meetings of the National People's Congress (NPC), China's legislature, and the National Committee of the Chinese People's Political Consultative Conference (CPPCC), a top advisory body to the government, according to cs.com.cn.
The two sessions - as they are known - should shed light on specific measures to tackle issues such as overcapacity and high inventories.
Compared with stimulating demand, which tends to be short-lived, supply-side management is expected to generate sustainable, quality growth, the Xinhua News Agency said in December 2015.
And instead of working on the demand side, attention has turned to stimulating business through tax cuts, entrepreneurship and innovation, while phasing out excess capacity resulting from the previous stimulus.
However, policies should be tailored to the different situations of China's first-, second- and third-tier cities.
Real estate prices in the first-tier cities of Shenzhen, Beijing, Shanghai and Guangzhou have jumped since 2015. However, if home prices continue to rise, houses would become unaffordable for local residents.
Meanwhile, in mid-sized and small cities, authorities have implemented additional favorable policies to encourage home buying, in line with the central government's efforts to reduce inventories, media report said.
Also, proposals about lowering enterprises' costs will be put forward at the two sessions, cs.com.cn said.