Nation showing more signs of recovery

Regarding the ongoing debate about whether we are in economic recovery or whether deflation runs the risk of derailing a comeback, we clearly state that the current situation is the beginning of an economic recovery, not a deflationary cycle. There are five takeaways regarding the economic situation this year — China will once again lead the world in terms of economic recovery; the real estate market is witnessing some green shoots of resurgence; the stock market is expected to witness a structural bull market; the country will maintain an accommodative monetary policy; the US Federal Reserve will likely pause rate hikes and will start cutting interest rates going forward.

We believe that China's economy is at the starting point of a new round of recovery.

China's GDP grew by 4.5 percent year-on-year in the first quarter, exceeding market expectations and kicking off the year on a positive note.

We predict that if we make a full effort to boost the economy and consolidate the momentum of economic recovery, China's GDP will likely expand over 8 percent year-on-year in the second quarter, with full-year GDP growth of about 6 percent in 2023.

Looking at the three major economies around the world, the US economy is moving from stagflation to mild recession, the European economy is moving from recession to deep recession, and China's economy is bottoming out to mild recovery.

China's economy is on a recovery track, social financing and credit are expanding beyond expectations and credit demand within the real economy is rebounding. China's outstanding aggregate social financing jumped 10 percent year-on-year as of the end of March, a 0.1 percentage point higher than that of the previous month. The country's new yuan-denominated loans totaled 3.89 trillion yuan ($559.7 billion) in March. China's broad money supply, or M2, surged 12.7 percent from the year prior, 0.2 percentage point slower than the previous month.

China's investment in infrastructure and high-tech manufacturing industries continued to grow. In March, investment in infrastructure construction, excluding water, electricity and gas, increased 8.7 percent year-on-year, and investment in manufacturing rose 6.2 percent. Investment in electrical machinery related to "new infrastructure", electronic equipment manufacturing and automobile manufacturing grew by 51.5 percent, 12.1 percent and 15.6 percent in March, respectively.

In March, exports increased 14.8 percent year-on-year. The industrial structure upgrading has promoted high growth in new energy vehicles, lithium batteries and solar cells. And China's exports to ASEAN, India, Brazil and Russia have increased significantly. However, China still faces export pressure.

China is also witnessing a rebound in consumer spending and the rapid recovery of offline scenarios. In March, the country's retail sales increased by 10.6 percent year-on-year.

A State Council executive meeting held in early April said the country will make more efforts to stabilize foreign trade, employment and expectations, accurately assessing the pulse of the Chinese economy. Recently, a series of policies have been introduced to boost confidence in the private economy.

While being optimistic about the prospects of China's economic recovery, we also recommend maintaining rational optimism and paying attention to employment and prices. The foundation of economic recovery is not yet solid, and we still need to make more efforts to shore up the economy to avoid deflation.

We need to focus on the employment of young people aged 16 to 24.In March, the surveyed urban unemployment rate and the surveyed urban unemployment rate of 31 large cities came in at 5.3 percent and 5.5 percent, respectively, a decrease of 0.3 and 0.2 percentage point from the previous month. The unemployment rate for young people aged 16 to 24 stood at 19.6 percent, an increase of 1.5 percentage points from the previous month.

In March, China's consumer price index, a main gauge of inflation, rose by 0.7 percent year-on-year, a decrease of 0.3 percentage point from the previous month. The producer price index, which gauges factory-gate prices, fell by 2.5 percent year-on-year in March. The decline in prices was dragged down by factors such as high base effects, hog prices, the impact of international commodity prices and price wars in the automobile industry.

While taking note of the signs of economic recovery, we should also be aware that market confidence and the endogenous driving force are still weak and insufficient.

Looking ahead to the second quarter, we should keep an eye on the following three factors: the future evolution of the recovery in the property market and its impact on consumer confidence; the potential for the recovery of consumption, which is closely related to expectations, incomes and employment; and pressure on China's exports amid declining external demand.

China's economy is in the early stages of recovery and faces problems such as insufficient demand. Only by fully boosting the economy can we prevent deflation. The key is to boost confidence and step up macroeconomic policy support in terms of fiscal, monetary and industrial policies, which will support the real economy and expand domestic demand.

The country should focus on boosting the development of "new infrastructure" and new energy, which are important means for both the short-term expansion of effective demand and long-term expansion of effective supply.

China needs to make a big push to promote better collaboration between enterprises, universities and research institutes, which encourages technological innovation and applications of related technologies. It also needs to further expand the scope of the pilot program of real estate investment trusts, or REITs, and implement strategies for developing metropolitan areas and city clusters.

The country should also improve the childbirth policy system and provide preferential measures for child-rearing. In the short term, it will stimulate consumption and boost investor confidence. In the long term, an increasing population and human capital improvement can enhance China's innovation, competitiveness and its long-term potential growth rate. To build a support system for childbearing, the country needs to introduce more preferential tax policies, provide childcare services, boost education investment and strengthen women's rights in the workplace.

Ren Zeping is an online influencer and former chief economist of property giant Evergrande.

The views don't necessarily reflect those of China Daily.