Policy support

Fully aware of the downside risks, the Chinese government has taken multi-pronged efforts to remove the structural and institutional barriers hampering long-term growth.

In implementing a proactive fiscal policy, the country announced cuts in tax burden and social insurance contribution of businesses by nearly 2 trillion yuan (about 291.12 billion U.S. dollars) in 2019.

In the first five months, newly-introduced tax cuts and fees reductions have saved businesses by around 893 billion yuan.

CICC said the effect of the large-scale tax cuts this year would likely reach its "peak" in Q3 or Q4, supporting corporate profitability and consumption growth.

For targeted financing support of the real economy, China has announced a lower reserve requirement ratio (RRR) in three phases to support private as well as micro and small enterprises, which is expected to unleash a total of 280 billion yuan of liquidity. The third phase of the RRR cut is scheduled to take effect Monday.

The government has also announced measures to improve the business environment, encourage local government special bond issuance and open up more sectors for foreign investment.

"These measures will promote the economic development of both China and the world, making China still a growth engine for the world economy," said Jeffrey Wong, head of the advisory of KPMG China.

Mao Shengyong expected the effects of these policies to be more obvious in H2, and said the government had ample room for policy maneuvers.

Taking boosting investment as an example, Mao said fast urbanization and the government's regulation policies will prevent big swings in property development investment, while accelerating local government special bond issuance and major project approvals will lead to rebounding growth in infrastructure investment.

Lian Ping, chief economist with the Bank of Communications, expected the economy to grow 6.3 percent in 2019.

The country's economic growth may fluctuate with growing external uncertainties, but will not slide out of the annual target range, Lian said.

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