MNI China Press Digest Dec 13: Monetary, Fiscal, Private Firms

Highlights from Chinese press reports on Wednesday:

• The People’s Bank of China will likely cut interest rates and the reserve requirement ratio next year to keep the growth rate of M2 and social financing at a high level, while the Central Economic Work Conference indicated monetary policy will need to support the rebound of prices and the return to the potential growth level. The conference said in a statement Tuesday that “the scale of social financing and money supply should match with the expected goals of economic growth and price levels,” given that low prices this year have resulted in a large deviation between social financing growth and the nominal GDP growth. China’s current potential growth is about 5.5%, and the price target in recent years is circa 3%, which means the growth rate of social financial and M2 should be 8.5% or higher. (Source: 21st Century Business Herald)
• The Central Economic Work Conference indicated next year’s fiscal stance remained unchanged and the deficit ratio could exceed 3% with the central government taking the lead, according to Luo Zhiheng, chief economist at Yue Kai Securities. Authorities will maintain positive fiscal policy to support the expansion of total demand and prevent economic and social risks, Luo added. Feng Qiaobin, deputy secretary-general at the China Finance Society said the conference emphasised the need to stabilise the macro economy next year, considering pandemic scar effects have not completely faded. (Source: Yicai)
• China’s private sector should expand production overseas to diversify supply chains and allow the domestic economy to focus on high value-added and higher productivity services, according to Zhang Jun, director at the China Economic Research Center. This way, private firms can avoid overcrowding in the domestic market and adapt to the government’s move away from excessive reliance on investment towards promoting new driving forces. China should establish itself at the forefront of a new wave of multinational firms, Zhang added. (Source: Yicai)