China’s official media reports said the National People’s Congress will meet on Nov. 4-8 in a key session, during which investors and economists expect concrete information on fiscal stimulus to be implemented by the government.
Late October last year, the NPC increased the fiscal deficit of China by a very good margin, from 3% to 3.8%. This year, people are looking out if that’s being done in national budget or deficit with regards to the economy since challenges persist. Bruce Pang is Chief Economist and Head of Research for Greater China at JLL, which explained the meeting is essential for setting the course for the fiscal policy.
Over the past few months, the financial situation of China has shown that a higher level of fiscal support is in order. A few weeks ago, Finance Minister Lan Fo’an stated that a higher deficit was possible, along with greater bond issuance, because huge adjustments needed to be done before it could make some formal statements. This happened after top leaders, among them President Xi Jinping, met at the end of September, urging fiscal and monetary policy to be enhanced.
Along with this, the People’s Bank of China has provided a series of rate cuts and continued real estate sector support measures. Chinese stock markets surged following the late September discussions, though trading has been marked by volatility because of a lack of concrete policy announcements.
Pang expects the NPC session to throw some light on changes in the budget and probably also indicate if any bond issues are planned. However, analysts have toned down their expectations about a super-sized fiscal stimulus that would directly pour money into consumer spending. Instead, they say, support may first go towards struggling local governments that were hit hard by slowdowns.
The economy in the first three quarters of 2023 gained a slight annual growth of 4.8% after falling by 5% compared with the first half. According to the government target for 2024, there should be an annual growth rate of around 5%. This will force them to implement proper fiscal actions over the next months.
