Policies paying off and will be more evident in 2nd half

Although external uncertainties abound and domestic downward pressure has grown, China’s policymakers have many economic levers at hand to combat the challenges.

While saying economic achievements in the first half of the year are hard-won, Premier Li Keqiang has called for tapping into countercyclical measures and carrying out pre-emptive and fine-tuning when necessary.

Analysts said if the economic environment exacerbates, the government would beef up monetary, fiscal and other policy support on top of existing incentives.

The government unveiled many pro-growth policies, including the 2-trillion-yuan (US$290.7 billion) tax and fee cuts, special local government bond issuance and targeted financial supports.

The headline figure showed the economy expanded 6.2 percent in the second quarter of 2019, down from 6.4 percent in the first quarter but still within the government’s annual targeted range of 6-6.5 percent.

Despite the moderating GDP growth, activities rebounded visibly in June, with almost all the growth indicators beating expectations, a sign that effects of the policies are filtering through and will be more evident in the second half, said Mao Shengyong, spokesman of the National Bureau of Statistics.

UBS economist Wang Tao expected the People’s Bank of China, the country’s central bank, to ease liquidity to ensure continued credit rebound in second half and cut the reserve requirement ratio by 100 basis points without adjusting the benchmark rates.

Cheng Shi, chief economist with ICBC International Holdings, echoed Wang’s view and said following the possible rate cut of the Fed, the PBOC is likely to lower the interest rates of open market operations or the medium-term lending facility.

The PBOC adopted targeted RRR reduction twice this year to support private as well as micro and small enterprises. The latest RRR cut, announced in May and being conducted in three phases, unleashed a total of 280 billion yuan of liquidity into the market.

The government is expected to continue the proactive fiscal policy, with more support for weak links such as public services and infrastructure.

Meng Wei, a spokeswoman of the National Development and Reform Commission, said the government would push forward the construction of major projects and boost investment in the private sector.

The growth of infrastructure investment is expected to rebound to “mid-high single digits” in second half from 4.1 percent in first half, said Wang Tao, the UBS economist.