China is on track for a steady rebound in the third and fourth quarters as policy stimulus takes effect, and renewed COVID-19 outbreaks will be less disruptive to the supply chain, experts said.
They expect strong fiscal easing — notably in infrastructure spending — to shore up growth, better use of structural monetary tools and more government measures to further stimulate consumption, which will help boost domestic demand and build a strong national market.
Luo Zhiheng, chief economist at Yuekai Securities, expected the growth to recover to 5 percent in the third and fourth quarters of the year, making a full-year V-shaped rebound.
To stabilize overall growth, Luo said it would be advisable to allocate some of the 2023 quota for local government special bonds in advance in the fourth quarter and to increase financial support for small and medium-sized enterprises, technological innovation and green development.
For the second half of 2022, a recent meeting of the Political Bureau of the Communist Party of China Central Committee urged efforts to keep the economy running within an appropriate range and to strive for the best possible outcome.
It was decided that major economically developed provinces should play a leading role and provinces that are able to should strive to meet the objectives set for economic and social development this year.
Zhu Haibin, JPMorgan's chief China economist, said the central government made a "practical" choice to de-emphasize the preset annual GDP growth target of around 5.5 percent in the face of unexpected shocks from COVID-19 and external challenges.
Zheng Houcheng, director of the Yingda Securities Research Institute, said the five coastal provincial regions in southeast China that account for over one-third of China's economy — Fujian, Guangdong, Jiangsu and Zhejiang provinces and Shanghai — will play a key role in stabilizing overall growth.
Local governments across China have recently accelerated measures to boost consumption, a major challenge to the national economy in the second half of the year, for example by encouraging car purchases and issuing consumption vouchers.
China's southwestern Yunnan province has released a plan for boosting consumption and stabilizing growth from 2022 to 2024, requiring efforts to develop online and offline consumption and encourage digital and intelligent transformation of traditional trade enterprises and to build Kunming into an international consumption center.
The northern port city of Tianjin is planning to unveil 20 measures to spur consumption, it said in a recently released document, with major focus on encouraging consumption of cars, housing, home appliances, and cultural tourism as well as stimulating new types of consumption.
Beijing, Shanghai and Shenzhen, Guangdong province, have also unveiled a series of measures, such as holding shopping events and giving out coupons and subsidies.
Ye Yindan, a researcher at the Bank of China Research Institute, said investment will also be a key growth driver.
To further spur consumption in the second half, Ye said the government should expand efforts to boost residents' confidence and expectations by beefing up support for the unemployed and low-income groups.
She proposed adopting more measures, such as encouraging more promotions and sales on holidays, offering subsidies to buyers of new energy vehicles and green home appliances and easing restrictions on the recovery in services consumption amid COVID-19 outbreaks.
Looking ahead, Ye said China's economy will likely rebound quarter by quarter as the stimulus policy gradually takes effect, and the country will keep economic performance stable within a reasonable range in the second half.