China’s parliament is gearing up to unveil moderate stimulus plans in an effort to stabilize economic growth as it convenes for its annual meeting. Premier Li Qiang is set to present economic targets for the year and deliver his first work report to the National People’s Congress.
Focus on Near-Term Support
Despite mounting pressure due to a property crisis, deflation, a stock market rout, and local government debt woes, the focus of the NPC agenda is expected to center on near-term support to rejuvenate the slowing economy post-pandemic rebound.
Growth Targets and Fiscal Stimulus
It is anticipated that Li will set a growth target of around 5% for 2024, necessitating more fiscal stimulus to achieve President Xi Jinping’s ambitious goal of doubling the economy by 2035. This may involve issuing special sovereign bonds to support strategic sectors like food and energy.
New Infrastructural Investments
In light of diminishing returns from traditional investment avenues, China is likely to shift its focus to “new infrastructure” projects such as 5G telecommunications, artificial intelligence, and big data. This move aligns with Xi’s emphasis on cultivating new productive forces.
Central Bank Policy
The People’s Bank of China is expected to continue easing policies gradually, possibly expanding initiatives to supplement lending in the property sector. However, there is apprehension regarding aggressive moves that could trigger capital outflows and currency depreciation.
Amid record low consumer confidence and waning investor sentiment, proponents of reform are advocating for pro-market policies to stimulate household demand. Suggestions include easing urban residency permits for rural migrant workers and restructuring the tax system to address mounting municipal debt.
Debates Surrounding Reforms
While calls for reform intensify, reservations persist regarding the lack of appetite for substantial stimulus measures that could jeopardize financial stability. The NPC, not traditionally associated with significant policy shifts, may face pressure to accelerate reforms amidst economic uncertainties.
The absence of a scheduled plenum, which typically signals policy changes, has sparked concerns among investors. However, the Central Commission for Comprehensively Deepening Reforms has affirmed its commitment to using reform strategies to address developmental challenges.
The upcoming NPC meeting is poised to introduce measured stimulus plans to support China’s economic recovery without straying into risky territory. Balancing the imperative for short-term stability with the necessity for long-term structural reforms remains a key challenge for China’s policymakers.
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