Lawmakers to stress stability, infra investments

Official data showed that the country allocated 1.46 trillion yuan of the 2022 local government special bond quota in advance last year to spur infrastructure investments, with 484.4 billion yuan in special bonds having been issued in January. The bond proceeds will be used mainly in nine areas, including transportation, energy and environmental protection.

The country has also stressed at top-level meetings to carry out in advance infrastructure investments and speed up the construction of major projects arranged by the 14th Five-Year Plan (2021-25), which has had a positive impact on certain sections of the A-share market as well as commodity markets.

"The (steel) market has turned optimistic about this year's infrastructure investment growth as different regions successively rolled out major construction projects as part of pro-growth efforts," said Ma Lijiang, deputy general manager of Jingye Group Sales Corp, a steel producer based in Pingshan county, Hebei province.

"This will significantly drive market demand for steel products. We will seize the opportunity to expand our market presence," Ma said.

Apart from infrastructure investment plans, the two sessions may release policy measures to boost investments in high-tech manufacturing, green development and digital transformation in order to bolster the economy, said Cheng Shi, chief economist at Hong Kong-based ICBC International.

Thanks to sped-up investments in infrastructure and green development, buoyant high-tech manufacturing sectors and the construction of affordable housing projects, the Chinese economy may stabilize in the second half of the year and achieve full-year GDP growth of 5.1 percent, Cheng said.

Experts also expect the two sessions to announce tax and fee cuts of a greater amount compared with last year's roughly 1.1 trillion yuan, which will play a key role in cushioning economic downward pressure and vitalizing market players.

Finance Minister Liu Kun said in a recent article published by People's Daily that the country will scale up tax and fee cuts this year, with a focus on medium, small and micro-sized enterprises, self-employed businesses and manufacturers.

On the monetary policy front, experts said the two sessions may stick with China's commitment to avoiding flood-like stimulus and ensuring flexible and appropriate support for the economy, implying that there will remain some space for cuts in interest rates and the reserve requirement ratio if economic sentiment sours.

Chen Xingdong, chief China economist with BNP Paribas, said the People's Bank of China, the country's central bank, will likely further cut the policy interest rate in April or May by 5 basis points to boost credit growth and stabilize domestic demand.

As growth stabilization has become a top policy priority for the year, experts also anticipate more measures to be unveiled at the two sessions to fend off side effects of economic stimuli, like undermining debt sustainability and piling up financial risks.

Financial regulators will stay alert for any inappropriate allocation of liquidity that could spark financial risks in key areas like local government debt and the property market, said Cheng from ICBC International.

To avoid non-repayments of special bonds, the government will attach more importance to ensuring that infrastructure projects are able to generate adequate investment returns while stressing the effectiveness of fiscal policy in supporting the economy, Cheng said.

"Planning of infrastructure should be aligned with the future of economic growth," said Pang with ING. "Audit of local governments should be tighter to increase the efficiency of the use of funds in infrastructure projects."

Kaifusai Julaiti contributed to this story.