China stronger after COVID challenge

The country's fast recovery rests partly with the macroeconomic policy mix of raising the deficit, tax relief as well as cuts in lending rates and banks' reserve requirements.

"Unlike its European and US counterparts, China stayed away from using a deluge of stimulus policies but implemented more targeted countercyclical adjustments," said Xu Hongcai, deputy director of the Economic Policy Commission of the China Association of Policy Science.

Compared with the 4 trillion yuan ($612 billion) stimulus package China adopted to cope with the 2008 global financial crisis, this year's measures were "gentle", said Zhang Yansheng, chief researcher of the China Center for International Economic Exchanges.

To maintain stable liquidity while avoiding money flooding the market, China's central bank placed more focus on enabling structural policy tools, including re-lending and rediscount programs.

China's financial institutions saved enterprises 1.25 trillion yuan during the first 10 months, and are expected to save 250 billion yuan more in November and December.

Stabilizing employment has been a macroeconomic policy priority throughout the year as it closely relates to people's well-being and social stability.

Due to relentless job creation efforts, the country's unemployment rate stood at 5.3 percent in October, the lowest of the year. Over 10 million new urban jobs were created during the first 10 months, meeting China's annual target ahead of schedule, said the Ministry of Human Resources and Social Security.

For small and medium-sized businesses－the main drivers of job creation－debt and uncertainties remain major challenges.

Xu said he expects macroeconomic policies to continue to focus on protecting market entities and boosting employment next year, which is crucial to stabilizing households' income expectations and increasing a willingness to consume.

"Extraordinary measures should be phased out in 2021 instead of an abrupt exit," Xu said.

In its third-quarter monetary policy report, China's central bank pledged to make its prudent monetary policy more targeted and flexible to better adapt to the needs of high-quality development and put more focus on the efficiency of financial services to support the real economy.

Morgan Stanley predicted that policymakers will likely normalize credit growth and its fiscal stance next year with a full recovery in the labor market and deployment of COVID-19 vaccines, according to its November report.

Noting that 2021 will be an especially important year for China in advancing modernization, a meeting of the Political Bureau of the Communist Party of China Central Committee on Dec 11 called for sound and precise implementation of macro policies, keeping the economy running within a reasonable range and adhering to the strategy of expanding domestic demand next year.

Reforms on both supply and demand sides should be carried out to achieve a dynamic equilibrium on a higher level, in which supply and demand can boost each other, the meeting said.

"China's overall economic efficiency has improved in recent years due to supply-side structural reforms. As the country will deepen reforms on both supply and demand sides in the years to come, the economy will see greater growth potential," Zhang said.