With the epidemic situation tending to ease, China's economic operation showed positive signals in May, with the growth of industrial added value turning from negative to positive, exports growing faster than expected, and the decline of total retail sales of social consumer goods and the production index of the service sector beginning to decelerate.
Data showed that China's fixed asset investment rose 0.72 percent month-on-month in May, and the cumulative year-on-year growth rate from January to May reached 6.2 percent, significantly higher than the overall growth rate of the economy.
The country's aggregate demand generally remains feeble, the factor utilization rate is not high and the overall economic operation is a little weak. However, the rapid growth of fixed asset investment is helping stabilize the macroeconomic market. In the medium and long term, fixed asset investment will also help strengthen weak links, and consolidate the foundation and build up the momentum for the transformation and upgrading of the industrial structure.
However, it should be noted that China's economy is still weak and the recovery momentum not strong enough in the face of shrinking demand, supply shocks and weakening expectations, as well as the impact of external factors such as the Russia-Ukraine conflict and the United States Federal Reserve's interest rate hike.
China should strive to innovate investment and financing methods in light of the characteristics of new technologies, new industries, new forms of business and new models, to make the financial system more adaptable. It should take into account both development and security, and keep the capital market two-way open to create conditions for China's science and technology enterprises to make good use of both domestic and international markets and resources. It should also try to improve financial institution's risks identification and pricing capabilities and reduce the dependence on fixed asset mortgage.
The country also needs to improve infrastructure investment financing mechanisms to make them more compatible with the structural transformation of infrastructure projects. It should take into consideration both direct economic value and indirect social value, and design appropriate investment financing mechanisms for municipal roads, underground pipe networks and other infrastructure projects with low or no cash flow returns. It should also expand the real estate investment trust's pilot scope for infrastructure and use existing infrastructure projects to put funds to good use and provide support for new projects.