(Yicai Global) May 22 -- China should maintain the strength of its policy support to underpin the country’s ongoing economic recovery, according to a deputy head of a Beijing-based think tank.

The economy is picking up, but recovery from a three-year pandemic cannot be achieved overnight, Wang Yiming, vice chairman of the China Center for International Economic Exchanges, said yesterday at a forum organized by the Tsinghua People's Bank of China School of Finance.

The recovery should also be taken as an opportunity to transform the development mode, improving the economic structure and changing the driving force, Wang pointed out.

Insufficient demand remains the standout contradiction in China's economy, Wang added, noting that the pandemic greatly harmed household and business balance sheets.

Before balance sheets are repaired, residents are more cautious about consumption, firms are less willing to invest and have a lower risk appetite, and demand even softens, leading to households and businesses using as much cash as possible to pay off their debt, according to Wang.

Behaviors have shifted to debt minimization from profit maximization, Wang said, adding that it will take time to repair balance sheets. So confidence needs to be shored up and patience maintained to support the economic recovery, he said.

The money supply will increase when households and businesses pare down debt, which will likely lead to credit funds circulating among a small number of high-quality market players, Wang pointed out.

“The central government’s debt level is low now, so China can hike financial policies to give more help to micro and small enterprises, such as subsidies on housing rents and water and electricity bills, to help them recover," Wang said.

Confidence among the private companies hit hard by the pandemic has not fully recovered yet, he noted.

Private investment rose only 0.4 percent in the first four months from a year earlier, so effective measures should be taken to subsidize entrepreneurs, ensure that policies are stable and the business environment is fair, and protect the property rights of private firms and the rights and interests of entrepreneurs, he added.

Action should be taken to encourage and attract more private capital to invest in the country's major projects and construction of key industrial and supply chains to activate the investment enthusiasm and stabilize investment, according to Wang.

Moreover, China should strive to improve investment liberalization and facilitation, enhance the confidence of foreign companies about the business environment, and strengthen communications with them, Wang added.

Editor: Futura Costaglione