Goldman Sachs, Morgan Stanley forecast nation to make quick economic rebound China's economic growth is expected to recover strongly next year,
driven by consumption, manufacturing investment and resilient exports,
according to forecasts by leading international financial groups. Projections for the GDP growth of the world's second-largest economy
in 2021 range from 7.5 to 9 percent, the fastest pace since at least
2015. This comes after the introduction of supportive policies,
including monetary and fiscal measures, that were launched at the peak
of the coronavirus outbreak in the nation. The positive views on the prospects for China's economy come as
policymakers in Beijing have drawn up the "dual-circulation" development
paradigm with the domestic market being the mainstay and the domestic
and international markets supporting each other. The new development pattern is an active choice by China to better
adapt to the changing and evolving development stage of the Chinese
economy, and it is also a strategic move by China to respond to the
complex and challenging international environment, Vice-Premier Liu He
wrote in an article published in People's Daily on Wednesday. Liu said that the dual-circulation model is crucial for China to
raise its economic self-sufficiency and sustainability, boost the
resilience of the economy and maintain stable and healthy growth. China's timely and forward-looking policy adjustment has helped
strengthen confidence in the world's second-largest economy despite the
COVID-19 pandemic posing serious challenges to the global economy and
international industrial chains. US investment bank Goldman Sachs predicted that China's GDP growth,
on a yearly basis, is likely to rebound to 7.5 percent in 2021, up from a
projection of 2 percent this year. The recovery will be mainly driven
by household consumption and manufacturing investment. Its exports, in
the meantime, are expected to remain resilient, it said. Last week, another US-based investment bank, Morgan Stanley, offered
an even positive forecast for China's 2021 GDP growth of 9 percent, led
by a strong recovery in private consumption and global demand, with
policy stimulus being phased out. China's GDP growth is on track to reach pre-pandemic levels this year
thanks to the country's timely and efficient epidemic control measures,
according to Madhavi Bokil, Moody's vice-president and senior credit
officer. "The significant fiscal and monetary policy support that is already
in place will facilitate a pickup in economic activity after new
COVID-19 restrictions are lifted," Bokil said. The country is shifting to the "dual-circulation" development
paradigm, which seeks to steer its economy toward domestic demand
drivers, but never to give up external markets. Given an expectation that China will further integrate into the
global economy, China will be a part of the main driver of the world's
growth next year, especially for G20 emerging market countries. Its
recovery has already benefited export growth in other countries, such as
Germany, Bokil said. While the Chinese economy is expected to be on a stable path of
recovery, economists expect that China's monetary and fiscal policies
are likely to gradually normalize. The view was backed by the recent rise of the interbank market's
seven-day repo rate, a gauge of the prices of loans borrowed between
commercial banks, which has mostly returned to pre-COVID levels. Credit
growth has also slowed from the peak in the March-to-May period. "In China, monetary and credit policies have already been
normalizing," Shan Hui, chief China economist at Goldman Sachs, told
China Daily. Looking into the near future, Shan said that China's policy rates are
likely to remain stable, while credit growth may decelerate further. In terms of fiscal policy, the Goldman Sachs economist predicted the
government's on-budget fiscal deficit would narrow from 3.6 percent of
GDP this year to 3 percent in 2021, although local governments' maturing
bonds and refinancing demand are likely to pick up next year. Robin Xing, chief China economist at Morgan Stanley, said that
private consumption could emerge as the key growth driver in the coming
months, with a release of excess savings of Chinese residents and the
overall recovery of the domestic job market. Stronger global demand and reduced risks of trade tensions would
boost manufacturing investment, outweighing slower construction activity
and a slightly narrowed surplus of trade in goods and services,
according to Xing. "Policymakers will likely normalize credit growth and the fiscal
stance in 2021 with a full recovery in the labor market and the
deployment of COVID-19 vaccines in major economies," he added. Economists also predicted that the normalization of China's monetary
and fiscal policies will further elevate the interest rate differential
between China and the United States, which will be one of the drivers of
a further appreciation of the renminbi and stronger foreign exchange
inflows into China next year. But other major economies are likely to maintain monetary easing and
fiscal stimulus to tackle the COVID-19 shocks. And the US and European
Union central banks may re-raise their policy rates as early as 2025,
Goldman Sachs' economists said.
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