(Yicai) Dec. 12 -- China’s gross domestic product will expand by about 5 percent next year and quarterly growth fluctuations will smooth out as consumption picks up, according to a new report by the Bank of China.

GDP will increase around 5.6 percent this quarter and about 5.3 percent this year, the report said yesterday. The government set a target of “about 5 percent” for 2023 earlier in the year.

Consumption will recover further in 2024 and continue to act as “ballast” to economic growth, according to the report. Disposable income per head rose 5.9 percent in the first nine months of this year, outpacing GDP growth of 5.2 percent, while the propensity to consume reached 70 percent, higher than before the pandemic.

Spending power and the willingness to consume will continue to pick up, the Bank of China predicted.

Investment in infrastructure and the manufacturing sector will rise fast, while that in the real estate market will fall more slowly, the report said. Growth in the contact-based service sector will go on recovering to the pre-pandemic level, and the service sector's contribution to economic growth will stay above 50 percent.

The government’s budget deficit-to-GDP ratio will likely be higher than 3 percent next year, the bank said. China raised the deficit to about 3.8 percent of GDP this year from an initial 3 percent.

The Chinese government has a lower leverage ratio than the governments of other major economies and has more room to take on debt, the report said, adding that a more proactive fiscal policy would play an important role in steadying investment and growth.

The bank recommends China pay equal attention to stabilizing growth in the short term and promoting reform in the medium and long term and strive to create a stable and favorable external development environment in a global setting where uncertainties persist. 

China should also use a proactive fiscal policy to buoy market confidence, boost domestic demand, and stabilize market expectations, the report said.

Editor: Martin Kadiev