Fitch Ratings said China needs to complement any fiscal and monetary easing with additional structural reforms to address the country's medium-term economic challenges.
The agency said Jan. 3 that China's focus on sustaining growth hints at a more accommodative monetary policy, as the government looks to cut taxes cut taxes and increase capital spending by issuing bonds.
Following the Dec. 21, 2018, conclusion of the annual Central Economic Work Conference, officials pledged to implement a "prudent" monetary policy in 2019.
China would not return to credit-intensive stimulus, which would put pressure on the rating, and would rather prefer fiscal measures such as tax cuts, according to Fitch.
The rating agency believes U.S.-China trade tensions would impact exports, thereby curtailing growth in 2019. Vice ministerial-level trade talks between China and the U.S. will be held Jan. 7 and Jan. 8 in Beijing, China's commerce ministry said.
China recently revamped its foreign investment law to offer a level-playing field for foreign companies and ban forced intellectual property transfers. Capital market reforms, including a new technology board on the Shanghai Stock Exchange, were also proposed at the conference to reduce Chinese companies' dependence on bank credit. Other longer-term issues, like innovation in the manufacturing sector and giving a larger role to the private sector in addressing supply-side constraints, were also stressed at the conference.
In addition, the People's Bank of China made borrowing easier for small- and micro-sized enterprises by loosening the eligibility criteria.
However, some other more important structural reform challenges remain pending, including government support for state-owned enterprises and an imbalanced fiscal relationship between central and local governments.
The country will release its 2019 GDP and budget deficit targets in March.