20 Mar 2024
This year’s National People’s Congress (NPC) concluded on 11 March after one week of deliberations and six ministerial press conferences: an economic-themed press briefing, a foreign ministry briefing, a people’s livelihood-themed press briefing, and three ‘Minister Corridor’ press conferences. We highlight key insights from senior officials and policy priorities.
China’s policymakers highlighted ambition to promote large-scale equipment upgrading, a market estimated to be worth cRMB5trn annually (c4% of GDP), along with maintaining a focus on recycling during the process. This could accelerate depreciation of existing equipment, thus stimulating replacement demand. Meanwhile, the government’s ‘AI+’ initiative aims to drive transformation of traditional industries, making AI platforms more accessible and affordable.
However, there are still challenges for the industrial sector, such as “excessively fierce” competition and overcapacity (NPC, 6 March). Even as the domestic recovery gathers strength, it is not yet back to pre-pandemic levels while global demand has been relatively weak. Noting the need to better balance the market and improve capital allocation, the People’s Bank of China (PBoC) Governor noted that funding to sectors facing overcapacity would be curbed.
Under China’s new housing development model, policymakers aim to “establish a linkage among people, housing, land, and finance, where people determine housing, housing determines land, and housing determines finance” (Xinhua, 9 Mar). Statements suggest that housing policies will be localised and closely aligned with demographic trends, leaving room for governments to relax private housing restrictions and convert excess supply into social housing.
Domestic consumption has continued to be a leading force for economic growth over the last year. Alongside the calls to boost equipment upgrading demand, the government will also launch a consumer upgrading initiative aimed at boosting sales of large durable consumer goods such as auto sales and household appliances. This can help to broaden out the still strong services consumption and in turn unlock more industrial production and manufacturing investment spending. China has also budgeted more spending on social welfare while looking to promote the urbanisation of 170 million migrant workers and their families yet to settle in cities, which involves granting them social security, housing benefits, and public education.
The Chinese Securities Regulatory Commission (CSRC) continued to emphasise the importance of capital market reforms and strengthened financial market supervision to better attract longterm investors. They said that they would encourage companies to use dividend payouts while also resolving to crack down on fraudulent disclosures and make improvements on delisting regulations, and merger and acquisition policies. This should help to revive investor sentiment, especially when economic fundamentals and corporate earnings improve.
The NPC a sent clear signal for more proactive policy stance. Fiscal policies will play the leading role, as manifested in the punchier broad fiscal deficit of 8.3%, a 1.3ppt fiscal impulse compared with last year’s 7.0% figure. Monetary policy will likely stay accommodative too, with further Reserve Requirement Ratio (RRR) and interest rate cuts on the table in 2024. The PBoC could also inject more liquidity via monetary policy tools such as Pledged Supplementary Lending (following the RMB500bn net injection in December 2023 and January 2024).
Issuance of ultra-long term special treasury bonds, starting with RMB1trn this year, is intended to hit multiple targets including: 1. boosting domestic demand, 2. optimising government debt structure, by shifting more spending responsibilities to the central government, and 3. Building the foundation for structural transition, with funds will go towards “major national strategies and security capacity building”, according to the head of the National Development and Reform Commission said (NPC, 6 March).
The NPC a sent clear signal for more proactive policy stance. Fiscal policies will play the leading role, as manifested the punchier broad fiscal deficit. Compared with last year’s 7.0% figure, this means 1.3ppt fiscal impulse. Monetary policy will stay accommodative too, with another RRR cut likely in 2024, as well as a potential rate cut. The PBoC could also inject more liquidity via a variety of monetary policy tools such as pledged supplementary lending (RMB500bn net injection in December 2023 and January 2024).
Source: Refinitiv Eikon
* Past performance is not an indication of future returns
Source: Refinitiv Eikon. As of 18 Mar 2024 market close
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