[ANALYSIS] China Two-Sessions highlights and analyst thoughts

Analysis details (07:25)

Economic Targets and Policies

• 
  GDP Growth Target: Set at "around 5%" (exp. "around 5%")

- Analysts and desks frame the target as "ambitious".

• 
  Budget Deficit: Forecasted at CNY 4.06tln, with the budget deficit to GDP ratio seen at 3%. (ING forecast of "around 3.5%")

- ING suggested an increase would have indicated a more supportive fiscal stance, but the unchanged target suggests caution, possibly due to concerns over debt sustainability following the Moody's sovereign outlook downgrade in December.

• 
  CPI Target: Expected to be "around 3%" (exp. "around 3%")


• 
  Job Creation: Aims to create over 12mln new urban jobs, targeting a survey-based urban jobless rate of "around 5.5%", in line with expectations.


• 
  Liquidity and Monetary Policy: Focus on maintaining adequate liquidity and continuing proactive fiscal and prudent monetary policies.


• 
  Economic Adjustments: Emphasis on cross-cyclical and counter-cyclical adjustments to achieve economic growth targets, which are noted as challenging.


• 
  Social Financing and Money Supply: Growth to match economic growth and CPI increase goals.


• 
  Tax Policies and Foreign Investment: Plans to improve tax policies and intensify efforts to attract foreign investment.


• 
  Consumption Stimulus: Launching programs to stimulate consumption, including a "worry-free consumption" initiative.

Monetary and Fiscal Policy

• 
  Monetary Policy: Reiterated a prudent approach that is flexible, appropriate, targeted, and effective

- Some suggest limited scope for aggressive easing before global central banks start loosening policy. 

• 
  Fiscal Policy: A proactive fiscal policy will be continued, with an emphasis on enhancing quality and efficiency. Fiscal spending is planned to rise by 4%, and fiscal revenue by 3.3% in 2024

- Desks suggest a shift towards a "moderately strengthen" fiscal policy stance, removing language about avoiding "stimulus flooding."

• 
  RMB Language: Unchanged - to maintain the basic stability of the RMB exchange rate at a “reasonable and balanced level.”

Debt, Issuance, and Financial Risks

• 
  Special Treasury and Local Government Bonds: Issuance of CNY 1.0tln in ultra-long-term special treasury bonds and setting a quota of CNY 3.9tln for local government special bonds (vs. CNY 3.8tln in 2023).


• 
  Debt Management: Focused efforts on defusing local government debt risks and taking measures against illegal financial activities.

Real Estate

• 
  Development Model: Accelerating the new development model and increasing government-subsidized housing.


• 
  Market Stability: Promoting steady and healthy market development and supporting urban renewal.

- Analysts note that few details were given on the property sector. 

Defence and Geopolitics

• 
  Defence Spending: Increase of 7.2% year-over-year, consistent with the previous year's target.

- Analysts highlight that China dropped the 'peaceful reunification' reference to Taiwan. In a separate report, China said it would “resolutely oppose separatist activities aimed at Taiwan independence and external interference”.

Energy and EVs

• 
  Energy Consumption: Targeting a 2.5% reduction in energy consumption per unit of GDP.


• 
  New Energy Vehicles (NEVs): Encouraging the growth of the NEV industry and addressing production overcapacity.

Agriculture

• 
  Investment: Increasing stockpiling investment to CNY 140.63bln, up 8.1%.


• 
  Grain Output: Targeting over 650mln metric tons of grain output.

Click here for the detailed release.

05 Mar 2024 - 07:25- Fixed IncomeData- Source: Newsquawk