Beijing, China – March 5: A Chinese policeman guarded the great hall outside the great hall outside the Great Hall before the National People’s Congress (NPC), or Parliament in Beijing, China on 5 March 2005.
Cancan Chu | Getty Image News | Getty images
China is expected to be a significant soft in domestic demand next week, while revealing Highly anticipated details on fiscal stimulation With the aim of reducing growth in front of increased American trade stresses.
The annual parliamentary meeting of the country, known as “two sessions”, begins on Tuesday with a Chinese People’s Political Consultative Conference – a top advisory body – followed by a meeting of the National People’s Congress.
The assembly has lasted for about a week in recent years and usually takes place after a press conference with the Foreign Minister and heads of economic departments.
In the initial meeting of NPC on Wednesday, Beijing is expected to revise its annual consumer price inflation target by about 2% – The lowest in over two decades – According to the Asia Society Policy Institute, 3% or more in the previous years.
It marks an implied recognition of minor domestic demand.
The new inflation target will function more as a roof than a target. China has been under the pressure of deflation at the slow pace of nominal GDP compared to the actual GDP for the seventh straight quarter in the last quarter of 2024, Larry Hu, an economist of the chief China in McCery, said in a note. consumer prices Gone only 0.2% in 2024 And 2023Whereas Producer prices are There was a decline for more than two years.
Robin Jing, an economist from Morgan Stanley’s chief China, told CNBC earlier this month, “Our thesis for this year is that deflation will remain constant.” “China will try some new approaches but … they will just try with small steps.”
Zing said that the stimulation of Beijing year is unlikely to boost the excitement when the social unhappy becomes more widespread with the possibility of economic recession, Zing said. He said how September excitement announcements came for more than a year after deflation trends.
Investors have closely seen Beijing’s efforts to address the country’s economic recession after an unexpected, high level. Pledge of support in September Inspired a stock rally. Market took advantage of Chinese President again Xi Jinping Conducted Rare meeting with entrepreneurs last week Along with Jack Ma of Alibaba and Liang Wenfeng of Deepsek.
On Wednesday, Beijing increased its budget deficit at 4% of GDP in 2024 in 2024, resonating the expectations of the general market.
This will mark a “meaningful change because the policy makers are reluctant to dissolve the 3% (deficit) range over the years,” Hu said.
He also hopes that China will be triple to Kota for special sovereign bonds for 3 trillion yuan ($ 410 billion) this year, from 1 trillion yuan in 2024, and the year quota to issue special local government bonds to 4.5 trillion yuan to 3.9 trillion yuan.
On Wednesday, China is also widely expected to set the GDP development target of the year on “about 5%”, which is the same for the last two years. This will suit the first declared target of XI Doubling the size of the economy from 2020 levels to 2035.
But analysts warned that Beijing would probably not come out at stimulation, which has increased the tariff of 10%on Chinese goods by 10%on Chinese goods, given the uncertainty with the US on the top of continuous technical sanctions, and On April 2, more duties may come soon,
This will cut exports, a rare bright place in China’s economy.
“March is very early for any major policy excitement, as policy makers require more time to see the real impact of the business war 2.0,” said McCweri’s Hu. “Their track records show that they cannot miss the GDP development target, but they do not even want to do much. At this point, they will keep their card closer to the chest.”
Coincides with a high-profile meeting in Beijing Trump’s speech in a joint session of Congress On March 4, where the US President can go to his agenda and goals for the year.
Consumption in focus
While the world’s second largest economy 5% increased in 2024Retail sales growth fell to 3.4% in 2023 faster than 7.1%. The real estate drag remained, a year before last year with a decline of 10.6% in the sector.
“We feel that the government is likely to give priority to ‘increase consumption’ as the top policy work in the NPC meeting,” Tao Wang, The economist of the main China at the UBS Investment Bank said in a note.
China has demanded to promote consumption by using trade-in subsidies to encourage the purchase of select goods. Official in January Extend the trade-in program To include smartphones and more home appliances, with details of subsidy support size in two sessions.
With a large budget deficit, Beijing can exceed the size of the consumer trade-in program from the previous year, which may exceed 300 billion yuan in subsidy, UBS ‘Wang said.
She also expects the government to solve concerns about income by subsidizing families with young children, increase pension payment and increase the state’s contribution to their insurance program for Chinese residents.
In the upcoming meeting, China also hopes to release its spending plans for defense and technological development for the next year.
Beijing is due to the decline that the next half decade of development began to form its preferences, known as “as” “”.Five year plan“The current one ends this year.
In China’s Communist Party-discretion system, two sessions have not been a traditional site for sharp policy changes. Instead, direction-setting is usually in high-level party meetings, such as Third plainum, last held in July 2024,
Xi meeting with entrepreneurs last week, and new policies to support the private sector and foreign investment Marcus Herman Chen, co-founder and managing director of China Macro Group, said that the first batch of changes made in view of the third planeum. “Symbolically, it is a quick and good start to advance the reforms and releases a hint that the corrections are in Beijing’s pipelines,” he said.
Private sector support
Chinese officials are reviewing the draft of a new law to support private, non-state-owned businesses, of which further details may come up during two sessions.
A proposed for law, China will stop the ad hoc collection of fine from businesses, State media said this week,
In the indication of how businesses have fought with fees extracts, public filing last year has shown that local governments have asked companies to companies. Pay back taxes On the back operation by 1994.
The new law will go a long way towards giving businesses “stable legal expectations”, said the Associate Professor at the Chinese University of Bruce Pang, Hong Kong Business School. At the parliamentary meeting, he also hopes that new measures that focus on increasing investment opportunities for non-state-owned enterprises, and help small technical companies to get more easily funding.
Many analysts saw the presence of technical entrepreneurs with Xi at last week’s meeting as a strong sign that a regulator cracked out on Internet companies was officially finished.
Chim Lee, senior analyst at The Economist Intelligence Unit, said, “Moving forward,” regulatory firms for state technology firms regulators, are ready to show them regulatory in return for their investment in innovations in important techniques. ,
China Anti-corruption investigation by government officials And officials of state -owned companies are still going on for illegal behavior. More than 40 people have been removed, mostly on allegations of corruption, as representatives of the national people Since the current word began in 2023CNBC according to calculation official figures,
