Ample macro tools

Zhang Bin, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said strengthened fiscal and monetary support will be needed this year to ensure a steady expansion in domestic demand.

This measure is required, as the economy's recovery momentum might not be sufficiently strong for growth to return to a level on par with China's potential growth rate, given COVID-related damage to financial conditions and risk appetite among businesses and households, Zhang said.

To expand domestic demand, the Central Economic Work Conference decided to take a number of steps to raise incomes and support consumption of housing, new energy vehicles and care services for the elderly.

The meeting decided that proactive fiscal policy should be stepped up, with a better mix of tools including fiscal deficits, special-purpose bonds and interest subsidies. Prudent monetary policy should be targeted and effective, with reasonable and sufficient liquidity maintained.

Xu Hongcai, vice-minister of finance, said at a recent event that China's deficit-to-GDP ratio and the scale of local government special-purpose bonds will be set properly to ensure the intensity of government-backed investment does not slow.

As fiscal policy increases support for the economy, Wen Bin, chief economist at China Minsheng Bank, said he expects the nation's deficit-to-GDP ratio to stand at about 3 percent this year, up by 0.2 of a percentage point from the previous year, while the annual quota of special-purpose bonds may rise to 3.8 trillion yuan, up from 3.65 trillion yuan last year.

Wen said tax-cut campaigns might continue, and they could save some 3 trillion yuan in tax and fee burdens for businesses and residents to help strengthen their spending ability.

Liu Guoqiang, deputy governor of the People's Bank of China, the nation's central bank, said the aggregate strength of monetary policy should not be lower than the level last year, and should be raised further if needed — unless economic growth and inflation exceed expectations.

The central bank, which aims to provide "adequate" aggregate support and "accurate" structural aid, has abundant policy tools to hand, Liu said.

Experts said Liu's remarks show there might be further room to ease monetary policy in the first half of this year, with the possibility of cuts in interest rates and the reserve requirement ratio.