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China to keep up policy support for economy and focus on demand

But top leaders cautioned that the recovery is not strong enough and the country faces new obstacles upgrading and transforming it economy

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Reuters Beijing

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China will maintain support for the economy, focusing on domestic demand which remains inadequate, the Politburo, a top decision-making body of the ruling Communist Party, said on Friday, the state-run Xinhua news agency reported.

The triple pressures facing the economy - shrinking demand, supply shocks and weakening expectations - have eased amid better-than-expected first quarter growth, Xinhua reported following a Politburo meeting chaired by President Xi Jinping.

"Market demand has gradually recovered, economic development has shown an upward trend and the economic operation has achieved a good start," Xinhua said, citing the Politburo.

But top leaders cautioned that the recovery is not strong enough and the country faces new obstacles upgrading and transforming it economy.

"The current improvement in China's economic performance is mainly restorative, with weak momentum and insufficient demand," the Politburo said.

"Restoring and expanding demand is the key to the sustained recovery and improvement of the current economy." Proactive fiscal policy should be stepped up and work alongside monetary policy to boost demand, the Politburo said, reaffirming the current stance.

"The Politburo meeting shows the government will likely keep the supportive fiscal and monetary policy stance in the second quarter," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

China's economy grew at a faster-than-expected pace in the first quarter, as businesses and consumers were freed from strict COVID curbs that had hobbled economic activity, but there are still headwinds and the recovery remains uneven.

UNEVEN RECOVERY

As pockets of weakness remain and a full-blown economic recovery appears some way off, the Politburo said urban and rural household income should be increased in order to boost services consumption, while private investment should be encouraged.

The world's second-biggest economy has struggled to fully recover despite the lifting of tough COVID restrictions in December, as a tepid recovery in the property market, local debt risks and slowing global growth have dented confidence and overall demand.

China will expand employment channels for college graduates and stabilise jobs for migrant workers, the Politburo said.

The government would also reinforce confidence among businesses, guide state investment, stimulate private investment, and attract foreign investment, it added.

Legal and regulatory reforms would be made to encourage fair competition and development of enterprises, the Politburo said.

The Communist Party signalled upcoming reforms by approving guidance last week to promote the development of private firms, which account for half of the tax revenue, over 60% of output and provide 80% of urban employment.

China should attach great importance to development of general artificial intelligence, create an innovation ecology and fend off risks, the Politburo said.

The Politburo also reiterated its policy to support demand for improved housing, and ensure developers deliver.

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First Published: Apr 28 2023 | 3:35 PM IST

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