Beijing will roll out a number of proactive measures next year to further upgrade supply and boost demand, ushering China's economy into a brand-new paradigm of high-quality growth, officials and experts said following a policy-setting meeting.

The country will pursue supply-side structural reform as the main task while emphasizing demand-side management in 2021, to create a dynamic balance between supply and demand based on higher standards, according to the annual Central Economic Work Conference, which concluded on Dec 18. 

Xu Gao, chief economist at BOC International (China), said it is appropriate to add boosting domestic demand as a policy priority amid the COVID-19 pandemic, which will work hand in hand with supply-side reforms to ensure steady economic development despite prolonged uncertainties.

"Apart from the supply-side structural reform, the meeting called for the expansion of domestic demand. The latter is particularly crucial after COVID-19 hammered global demand, which was already under heavy pressure even before the pandemic," Xu said.

Demand-side policies such as maintaining the consistency of macro policy and narrowing the income gap will help expand domestic demand, while supply-side measures such as boosting the supply of healthcare and education services will meet growing demand and translate it into new growth momentum, Xu said.

The meeting mapped out a number of measures to boost domestic consumption, such as more steps to create jobs, improve the social protection system, and expand middle-income groups, according to a statement released after the meeting.

Qian Keming, vice-minister of commerce, said China will work to expand the consumption of automobiles, build some cities into international consumption hubs, and increase imports of high-quality products. He made the remarks on Dec 19 at a forum held by the China Center for International Economic Exchanges, a think tank.

Although China's economy is poised to be the only major economy with positive GDP growth this year, its recovery in domestic consumption has lagged behind that of exports and investment, with retail sales for the January-November period registering a year-on-year decline of 4.8 percent.

The country's full-year GDP for 2020 will probably exceed 100 trillion yuan ($15.3 trillion), growing about 2 percent year-on-year, Han Wenxiu, an official of the Central Committee for Financial and Economic Affairs, said at the CCIEE forum.

"The country is expected to reap noticeable benefits from boosting domestic demand next year as policy efforts deepen," said Wang Yuesheng, a professor of international economics and trade at Peking University.

Structural reforms to narrow the income gap will boost consumption in the long term, while measures to remove administrative restrictions on automobile purchases and boost the consumption of automobiles and appliances in rural areas, which are likely soon, will have a more immediate impact, Wang said.

Zhang Bin, a senior researcher at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said avoiding a sudden turn in macro policy direction is of great importance for bolstering demand and sustaining economic recovery, as many businesses continue to face difficulties due to the pandemic.

The meeting pledged to maintain the consistency, stability and sustainability of macro policy, and to extend necessary support for economic recovery in a more targeted and efficient way, said the statement.

Maintaining policies

Faced with an uncertain external environment next year, China will maintain its proactive fiscal policy and prudent monetary policy, striving to stabilize the economy at a reasonable level, Ning Jizhe, vice-minister of the National Development and Reform Commission, said at the CCIEE forum.

Adhering to supply-side structural reform will be critical for the measures to boost consumption to succeed, Wang added, as they will help meet people's need for high-quality products and services and create new demand via the emergence of new technological applications.

The country will strengthen its competitiveness in strategic science and technologies and make its industry and supply chains more independent and controllable in 2021, the meeting's statement said.

Specifically, China will ensure better implementation of key projects targeting breakthroughs in key technologies and solutions to bottleneck problems, while encouraging businesses to focus on their areas of strength and forge new cutting-edge technologies.

Supply-side structural reform, which focuses on improving production efficiency and promoting advanced industries and innovation, is part of Xi Jinping Thought on Socialist Economy with Chinese Characteristics for a New Era, and was first advocated in 2015.

Experts said the measures to improve the supply-demand relationship will be a key part of the nation's new development paradigm that makes the Chinese economy more resilient against external uncertainties in the upcoming 14th Five-Year Plan (2021-25) period.

Wu Chaoming, chief economist at Chasing Securities, said the policy measures to strengthen the domestic supply system and technological power will not only help unleash the potential of domestic demand, but make the Chinese economy less vulnerable to unstable factors in overseas supply chains.

All of this will contribute to the construction of the "dual-circulation "development paradigm, in which the domestic market is the mainstay while domestic and international markets boost each other, Wu said.

To construct the new development paradigm, the meeting also pledged to continue high-level opening-up efforts, widen market access, and actively consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

With demand-side measures to complement supply-side structural reform to address new challenges brought by the COVID-19 pandemic, the Chinese economy will post a strong economic rebound next year with elevated quality of growth, experts said.

"We believe policy normalization, a consumption rebound, and an acceleration of various structural reforms to achieve higher quality growth will be the key themes of China's macro (environment) next year," economists at Goldman Sachs said in a research note.