(Yicai Global) March 8 -- Confidence in China’s economic performance has declined, according to chief economists polled by Yicai Global, falling from a six-month high last month amid continued pressure on the world’s second-largest economy.

The Yicai Chief Economists Confidence Index dropped to 50.2 this month, remaining in positive territory for a fourth straight month, according to the findings of a survey of 22 leading economists in China. The figure was 52.3 in February and 50.3 in December.

To stabilize the country’s economic growth and promote its recovery, the economists expressed optimism that the government will take more monetary policy action.

China’s monetary policy will continue to be loose, Xu Sitao, chief economist at Deloitte China, told Yicai Global, adding that capital may flock to safe-haven currencies such as the US dollar, the Swiss franc, and the Japanese yen given the geopolitical risks in Europe. Though a strong Chinese yuan may not weaken China’s competitiveness, it will hinder the effectiveness of monetary easing, he said.

In regards to rising energy and commodity costs, taxes and fees should be cut for small- and mid-sized firms in the downstream sector, where competition is fierce, Xu noted.

China has comprehensively turned to proactive policies to stabilize growth, and social financing will hopefully rise quickly in the first quarter, said Liang Zhonghua, chief economist at Haitong Securities. Fiscal policy is also becoming more supportive of infrastructure investment and the policies relevant to the real estate sector have also been adjusted, he added, noting that it is less likely that the government will launch austerity policies.

The economists surveyed expect new loans to have averaged about CNY1.5 trillion (USD232 billion) in February, down on January’s CNY4 trillion, and new social financing to have shrunk to CNY2.2 trillion from CNY6.2 trillion. They also forecast that the average M2, a broad measure of money supply that covers cash in circulation and all deposits, was 9.5 percent last month, down from 9.8 percent in January.

Lower Figures

Annual growth in fixed-asset investments was likely 4.5 percent in the first two months of the year, far below the 35 percent recorded in the same period of last year due to low baselines in 2020, according to the economists.

They also expect the trade surplus to have been about USD108.2 billion in the first two months of the year, lower than the official released figure of USD116 billion.

Total retail sales of consumer goods are expected to have grown almost 3.9 percent in the January-February period, much lower than the 33.8 percent in the same period of last year, they said.

The economists expect the consumer price index, a main gauge of inflation, to have risen almost 0.8 percent in February from a year earlier. The producer price index, which measures factory gate prices, is forecast to have soared 8.8 percent. Both figures are below the 0.9 percent and 9.1 percent gains disclosed by the Chinese government.

But they believe that the escalating Russia-Ukraine conflict will result in a further rise in global commodity prices such as petroleum and natural gas, fueling expectations of global inflation, as Russia is a large producer of energy and resources.

The average yuan-dollar exchange rate at the end of this year is expected to stand at 6.43, meaning that the yuan rate will strengthen by 1.7 percent from the level at the end of last month, according to the economists.

The Chinese government has set an economic growth target of about 5.5 percent for this year, in line with the prediction made in last month’s Yicai Global Chief Economists Survey. 

Editors: Xu Wei, Futura Costaglione