A worker conducts motion tests on AGV handling robots at the integrated AMT workshop of FAW Jiefang Automotive Co, a subsidiary of China FAW Group, in Changchun, Jilin province, on Aug 5, 2024. [Photo/Xinhua]

China's economy is likely to gradually stabilize in the third and fourth quarters, as policymakers are poised to step up stimulus measures aimed at stabilizing growth and deepening economic structural reforms, prominent economists said on Monday.

Consumption will remain a key growth driver in the remaining months this year, while the country's accelerated push for fostering new quality productive forces will inject fresh vigor into the economy, they said.

"While the broader economy is still facing several headwinds and challenges at both home and abroad, the country's stepped-up measures to deepen reforms, boost demand and support the development of the private sector will help inject vigor into the economic growth in the remainder of the year," said Chen Wenling, chief economist at the China Center for International Economic Exchanges in Beijing.

Citing the issuance of the ultra-long-term special treasury bonds, she said the move will further boost domestic demand as the funds raised will be mainly used for supporting the implementation of major national strategies, building up security capacity in key areas, and driving large-scale equipment renewals and trade-in programs for consumer goods.

Chen also highlighted the country's accelerated push for fostering new quality productive forces, especially the substantial growth in the high-tech and green "new three" products, saying that will inject strong impetus into the world's second-largest economy.

Exports of the "new three" — electric vehicles, lithium-ion batteries and solar cells — registered a year-on-year increase of around 30 percent in 2023, said the General Administration of Customs.

When it comes to the traditional "troika" powering China's economic development — exports, investment and consumption — Chen believes spurring consumption will be the primary driving force boosting China's economic growth.

Figures released by the National Bureau of Statistics showed that China's retail sales, a key measure of consumer spending, grew 2.7 percent year-on-year in July, up from the 2 percent growth in June. The cumulative year-on-year growth from January to July was 3.5 percent.

"The reason for the accelerated growth of total retail sales is due to not only a lower base but also the continuous expansion of new types of consumption, with digital, green and healthy consumptions becoming new trends," said Chang Haizhong, executive director of corporates at Fitch Bohua.

In July, retail sales of communication equipment, sports and entertainment products, and electric vehicles grew by 12.7 percent, 10.7 percent and 36.9 percent year-on-year, respectively, NBS data showed.

Late last month, China announced it would allocate about 300 billion yuan ($42 billion) in ultra-long-term special treasury bonds to support large-scale equipment upgrades and trade-in deals for consumer goods.

"That is expected to ultimately promote an increment of more than 600 billion yuan in consumption, effectively driving the growth of total retail sales in the second half of the year," Chang said.

Last month, the People's Bank of China, the nation's central bank, lowered the interest rate on seven-day reverse repurchase agreements or reverse repos — which serve as the short-term policy benchmark of interest rates — from 1.8 percent to 1.7 percent.

The seven-day reverse repo is a central bank tool to inject liquidity. The move demonstrated policymakers' strong commitment to strengthening macroeconomic policy support, experts said.

Looking ahead, Louise Loo, lead economist at British think tank Oxford Economics, said her team expects to see further rate cuts by the PBOC over the next two quarters, and the continued fine-tuning of fiscal policy easing toward the demand side, including signals from a recent meeting of the Political Bureau of the Communist Party of China Central Committee to increase household incomes via multiple channels.

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