Innovation, policy steps strengthen growth outlook

Technological innovation and robust policy support for domestic demand are bolstering China's economic resilience, laying a stable foundation for growth through the remainder of the year, economists said.

The assessment follows the Ministry of Finance's welcoming of the decision by Moody's Ratings to affirm China's A1 sovereign credit rating and upgrade its outlook to stable.

The ministry said the move reflects Moody's recognition of the strong resilience of China's macroeconomy and fiscal strength amid external shocks, as well as new drivers and progress in the country's high-quality development.

Against a backdrop of rapidly shifting global trade conditions and geopolitical risks, the Chinese government has rolled out a package of macroeconomic measures and strengthened policy coordination. As a result, the economy has withstood pressures and moved toward more advanced development, demonstrating the advantages of its vast domestic market, well-developed supply chains and strong export competitiveness — key pillars supporting China's sovereign credit profile, the ministry said.

Looking ahead, the ministry said that China will further deepen reforms, enhance fiscal sustainability and accelerate the development of new quality productive forces to solidify its economic foundation and better weather external uncertainties while contributing more to global economic recovery and prosperity.

Moody's said on Monday that its decision to affirm the A1 rating is underpinned by China's vast and diversified economy, as well as its strong capacity for innovation — evident in rising competitiveness across higher value-added sectors.

Jeremy Zook, lead analyst for China at Fitch Ratings, highlighted that China's core strength lies in its dominant position in global manufacturing and supply chains.

He also pointed to major expansions in the country's renewable energy and electric vehicle sectors, where China is increasingly at the global technological frontier. Fitch expects China's growth to be supported over time by its well-established manufacturing ecosystem and continued focus on building up advanced industries.

Over the past five years, China's GDP has expanded by more than 35 trillion yuan ($5.1 trillion), roughly equivalent to adding an economy the size of the Yangtze River Delta region. Despite multiple risks and challenges, the country maintained an average annual growth rate of 5.4 percent during the 14th Five-Year Plan (2021-25) period, contributing around 30 percent of global economic growth, according to the Ministry of Finance.

Xiong Yi, chief economist for China at Deutsche Bank, said that China's GDP growth of 5 percent in the first quarter exceeded market expectations, and the expansion was driven mainly by domestic investment and exports, while the property sector has also begun to show encouraging signs of stabilization.

Meanwhile, China's manufacturing sector is steadily emerging from deflation, benefiting from the combined push to curb excessive market competition, a global upcycle in heavy asset investment and energy-related shocks.

Economists at Deutsche Bank expect further improvements in corporate revenues and profitability, which are likely to help reinforce the recovery of investment and employment in the future.

In addition to robust exports, analysts at Orient Golden Credit Rating International said that China's GDP growth in the first quarter was driven by a rebound in investment after a previous slowdown and a slight acceleration in consumption.

Notably, the rapid rise of new quality productive forces has further reinforced their role as a key engine of economic growth. In the coming period, China's macroeconomic performance is expected to remain stable, while these new drivers — led by high-tech manufacturing — are set to sustain a faster pace of growth, they said.

jiangxueqing@chinadaily.com.cn