(Yicai Global) March 9 -- China has set a relatively conservative economic growth target for this year, leaving scope for upward revision, according to the chief China economist at UBS Investment Bank.

Chinese Premier Li Keqiang set a more than 6 percent growth goal when he presented the government’s work report at the National People’s Congress on March 5.

The 8.2 percent forecast by UBS also has upside potential, Wang Tao told an online communications meeting yesterday.

China is targeting an “above 6 percent” gain in gross domestic product for the year, Wang said, to take into account uncertainties such as the Covid-19 pandemic and the global economic recovery. But it also allows the government to make adjustments to avoid policies being too tight or too loose to achieve a specific target, she added.

China has set its deficit-to-GDP ratio at around 3.2 percent in 2021, up from 3 percent. Special local government bonds are only CNY100 billion (USD15.3 billion) less than that of last year, and the withdrawal of fiscal stimulus is more modest than previously expected. The government work report made clear that support for the real economy should be maintained to further boost employment and consumption.

In terms of monetary policy, UBS expects credit growth to slow from a peak of 13.8 percent last October to 10.8 percent by the end of this year.

UBS also believes the yuan may appreciate further against the US dollar, gaining to 6.4 by the end of the year.

The CSI300 Index, which tracks the performance of stocks on the Shanghai and Shenzhen stock exchanges, is expected to climb to 6,100 this year, an almost 23 percent gain from today’s close, while the Hang Seng Index could surge to 30,600, up about 6.3 percent on today, Wendy Liu, head of China strategy at UBS, told the same meeting.

In terms of net foreign capital inflows, UBS believes that foreign investment in Chinese mainland markets will also increase this year. It expects a net inflow of CNY200 billion into shares and CNY645 billion to CNY840 billion into bonds.

Editor: Peter Thomas