(Yicai Global) May 30 -- China’s economy is still very resilient despite the global economic downturn, so a healthy recovery is expected, the president of the China Development Institute said, adding that it will not be hard for the Chinese economy to expand by 5 percent or more this year.

Early in March, the Chinese government set a gross domestic product growth target of “about 5 percent” for 2023, one of the lowest in decades. The economy grew 3 percent last year.

China does not face high inflation like some developed countries, Prof. Fan Gang, who is also a former member of the People's Bank of China's monetary policy committee, also said at a recent forum held in Shenzhen.

China has a very high trade surplus, while some other countries have very troubling deficits, he noted, adding that the Chinese yuan's exchange rate is relatively stable, with the possibility of a big deprecation or appreciation out of sight.

New growth points for China are also emerging, enhancing the country's economic resilience, Fan pointed out. China was the world's largest new energy vehicle exporter in the first quarter of the year. Moreover, local companies made outstanding achievements in the fields of new energy technologies and equipment, artificial intelligence, the digital economy, and biomedicine.

But Fan also said inadequate demand is weighing on the economy, as supply has recovered faster than demand, including consumption and investment. The relocation of industrial chains overseas and geopolitical risks are other negative factors, he added.

Last month, consumer inflation in China was at its lowest since March 2021, edging up just 0.1 percent from a year earlier, data from the National Bureau of Statistics showed. Producer prices fell 3.6 percent.

“The current price drop is not deflation, which is caused by a downward move in the money supply,” Fan noted. “The current situation is just a price decline at the time of currency oversupply due to insufficient investment and consumption demand.”

In this situation, monetary policy is not able to play a significant role in stimulating the economy because at a time of inadequate employment and stalled salaries, it is hard to spur consumption through short-term stimulus measures, Fan noted. “We should mainly pay attention to investment needs, both in the public and private sectors,” he said.

“Private investment should be promoted by improving the investment environment and stabilizing the expectations of business owners,” Fan suggested, adding that it is also necessary to increase the issuance of long-term government bonds to raise funds for more urban infrastructure improvement projects.

“Private business owners have many reasons for having changeable and weak expectations, so we should help them solve the problems, thereby enabling them to invest,” Fan said.

“Moreover, we should take a balanced stance on encouraging large corporations to expand their business through further investment, while at the same time adopting proper measures to prevent their potential monopoly behaviors,” Fan noted.

Regarding the potential risks that the government may face if it increases the debt issuance, Fan said that the total debts of central and local governments is equal to about 60 percent of China's gross domestic product.

Even if the debts of local government financing vehicles are added, the figure is around 100 percent, so there is still room to raise the government debt burden further, he said.

Editors: Tang Shihua, Futura Costaglione