(Yicai) March 6 -- Confidence in China’s economic prospects increased this month, as chief economists surveyed by Yicai had a positive reaction to the Government Work Report presented at the Two Sessions, the country’s key annual policy meetings.

The Yicai Chief Economists Confidence Index rose to 50.65 in March from 50.62 in February, remaining above the contraction-expansion threshold of 50 for the sixth consecutive month. Yicai polled 14 leading China-based chief economists.

The Government Work Report delivered by Premier Li Qiang at the opening of the third session of the 14th National People’s Congress yesterday mentioned a more proactive fiscal policy and moderately loose monetary policy, sending a strong policy signal.

The policy stance on stabilizing the economy is clear, said Wang Han, chief economist at Industrial Securities. The fiscal policy will focus on supporting infrastructure, trade-in of consumer goods, and debt resolution, while the monetary policy will be moderately loose, with timely interest rate and reserve requirement ratio cuts, he noted.

However, uncertainties in the external environment will exacerbate fluctuations in the foreign exchange market and increase risks of capital flows, Wang added.

The Government Work Report also set this year’s gross domestic product target at around 5 percent, the consumer price index growth target at around 2 percent, and the deficit-to-GDP ratio at around 4 percent, figures that align with chief economists’ expectations.

The economists forecast the CPI to have shrunk 0.5 percent last month from a year earlier, compared with a 0.5 percent increase in January, and they expect the producer price index to have plunged 2 percent in February from the same period last year, narrowing from 2.3 percent the month before.

The CPI will log a decline in February because prices of vegetables, pork, and eggs fell after the Chinese New Year holidays, while only fruit prices increased, said Chen Xing, chief macroeconomic analyst at Caitong Securities.

Meanwhile, as various industries resumed work after the holiday, market demand marginally improved, with both the prices of raw materials and finished goods rising, leading to a narrowing decline of the PPI, Chen noted.

China’s industrial value-added likely grew 5.3 percent in the first two months of the year, compared with a 7 percent growth in the same period last year, according to the economists.

January had two working days less than February this year compared with last year, which may lead to a slight decline in industrial value added, said Lu Zhengwei, chief economist at Industrial Bank.

Fixed-asset investment and retail sales of consumer goods are expected to have both jumped 3.8 percent in the period, compared with 4.2 percent and 5.5 percent, respectively, a year earlier, the economists predicted.

With the expansion of the fiscal deficit, spending on consumer goods, especially the categories included in the trade-in programs, is expected to increase and have a positive impact on consumption, according to Wu Ge, chief economist at Changjiang Securities.

The economists expect new Chinese yuan-denominated loans to have declined to CNY1.33 trillion (USD183.1 billion) in February from CNY5.13 trillion in January, and social financing to have plunged to CNY2.5 trillion from CNY7.06 trillion.

Meanwhile, their average growth forecast for M2, a broad measure of money supply that covers cash in circulation and all deposits, remained unchanged at 7 percent.

Editor: Futura Costaglione