Morgan Stanley forecasts broader growth recovery in China

BEIJING - China is expected to witness broader recovery in growth this year, providing room for counter-cyclical tightening and refocusing on a sustainable growth path, according to a research report by Morgan Stanley.

The investment bank forecast a more balanced growth mix for the country in 2021, with continued improvements in private consumption and manufacturing capital expenditure (capex).

"We expect a strong cyclical recovery in manufacturing capex to above the pre-COVID trend on the back of robust external demand," said Robin Xing, chief China economist of the bank, in the co-authored report.

This echoed a steady expansion of industrial production last month, with China's value-added industrial output rising 9.8 percent year-on-year in April, official data showed Monday.

Fixed-asset investment in the manufacturing sector continued to increase in the January-April period, up 23.8 percent from a year ago. The figure was 3.9 percentage points higher than the overall investment growth.

China's consumption is also returning to the pre-COVID level, Xing said, attributing the rebound to favorable conditions such as continued labor market recovery, the release of precautionary savings, and a stable domestic epidemic situation.

According to official data, China's job market sustained the momentum of recovery in April, as surveyed urban unemployment rate stood at 5.1 percent last month, 0.2 percentage points lower than the level in March.

China's continuing growth momentum has provided room for gradual policy normalization to stabilize the macro leverage ratio, Xing said, adding that he expects broad credit growth to soften to 11 percent year-on-year by the end of 2021.

Going forward, the country is likely to focus more on long-term sustainability, with more efforts on facilitating urbanization, upgrading the manufacturing sector, renminbi internationalization and green growth, Xing added.