Beijing, China – March 5: The Chinese policeman stands a guard in front of the Great People's Hall before the opening ceremony of the National People's Congress (NPC) or Parliament, on March 5, 2005 in Beijing in China.
Cancan Chu | Getty Images News Getty images
China is expected to recognize a significant softening of domestic demand next week, while revealing Very expected details about the fiscal stimulus aimed at raising growth in the face of increased commercial tensions in the USA.
The annual parliamentary meeting in the country, known as “two sessions”, begins on Tuesday with the Chinese Consultative Political Consultation Conference – the most important advisory body – and then the meeting of its legislator, the National Congress.
The meeting lasted about a week in recent years and there is usually a press conference with the Minister of Foreign Affairs and the heads of economic departments.
At the first meeting of NPC on Wednesday, Beijing is to revise its annual purpose of consumer price inflation to about 2% – The lowest in over two decades – With 3% or more in previous years, according to Asia Society Policy Institute.
This means the secret recognition of the modest domestic demand.
The new purpose of inflation would act more as a ceiling than a goal that should be achieved. China was under deflational pressure, and the nominal GDP is growing more slowly than the real GDP in the seventh quarter in a row in the last quarter of 2024, Larry Hu, China chief economist in Macquarie, said in a note. Consumer prices It increased only 0.2% in 2024. AND 2023one sec Producers' prices have He fell for over two years.
“Our thesis this year is that deflation will last,” said CNBC Robin Xing, China chief economist at Morgan Stanley at the beginning of this month. “China will try a new approach, but … they will simply try in small steps.”
Beijing is unlikely to significantly increase the stimulus to the second half of the year, when the social misfortune with economic slowdown probably becomes more common, said Xing. He noticed that the ads of the September stimulus appeared over a year after deflating trends appeared for the first time.
Investors carefully observed Beijing efforts to solve the economic slowdown of the country after an unexpected, high level Oath of support in September caused a storage rally. Market profits increased again in the Chinese president XI Jinping he was holding A rare meeting with entrepreneurs last week In this Jacek he has I Liang Wenfeng from Alibab.
On Wednesday, Beijing will probably drill a budget deficit at 4% of GDP, compared to 3% in 2024, said Hu Macquarie, reflecting the general expectations of the market.
This would mean “a significant change, because decision -makers are reluctant to violate the threshold of 3% (deficit),” said Hu.
He also expects China to get the amounts of special sales of sovereign bonds to 3 trillion yuan ($ 410 billion) this year, from 1 trillion yuan in 2024, and also increase the annual issue of responsible local bonds to 4.5 trillion yuan from 3.9 trillion yuan earlier.
On Wednesday, China should also set the purpose of GDP growth to “about 5%”, just like in the last two years. This would be in line with the previously announced goal of the XI Roughly doubling the size of the economy from 2020 to 2035.
But analysts warn that Beijing will probably not go to stimuli, taking into account the uncertainty of commercial tensions from the USA, in addition to further technological restrictions, US President Donald Trump raised tariffs to Chinese goods by 10%and More obligations may take place on April 2.
This would cause export, which is a rare bright point in the Chinese economy.
“The march is too early for every serious political stimulus, because decision -makers need more time to see the actual impact of trade war 2.0,” said Hu of Macquarie. “Their achievements suggest that they cannot miss the target of GDP growth, but they also do not want to deliver excessively. At this point they hold their cards near the chest. “
Loud meetings in Beijing would be covered with Trump's speech at a joint session of the Congress March 4, where the US president can discuss his plan and goals for a year.
Consumption in general
While the second largest economy in the world increased by 5% in 2024.The increase in retail sales dropped violently to 3.4% from 7.1% in 2023. It lasted during the property, and investments in the sector dropped by 10.6% last year, from a year earlier.
“We believe that the government will probably prioritize to” increase consumption “as the most important political task at the NPC meeting”, Tao Wang, China's chief economist at UBS Investment Bank said in a note.
China tried to increase consumption with commercial subsidies to encourage you to buy selected goods. Authorities in January Expanded the exchange program To include smartphones and more home appliances, with details about the amount of support for subsidies at both sessions.
In the case of a larger budget deficit, Beijing may be more than twice as much as the size of the consumer commercial program from last year to over 300 billion yuan in subsidies, said UBS 'Wang.
He also expects the government dealing with the fears of income by subsidizing families with young children, increasing retirement payments and raising the state contribution to the insurance program for Chinese residents.
At the upcoming meeting, China should also publish their plans for defense and technological development for the coming year.
Beijing has this autumn to start the formalization of his priorities for the next half decade of development, known as “Five -year plans. “The current one ends this year.
In the Chinese system dominated by the party party, both sessions were not a traditional place of sharp political changes. Instead, determining the direction usually occurs at party meetings at a higher level, such as The third plenum, which took place in July 2024..
Meeting XI with entrepreneurs last week and new rules supporting the private sector and foreign investment Select the first batch of changes introduced after the third plan, said Markus Herrmann Chen, co -founder and managing director of China Macro Group. “Symbolically, this means a rapid and good start to the development of reforms and releases the signal that the reforms are in Beijing pipelines,” he said.
Private sector support
The Chinese authorities review a new law supporting private non -state -owned companies, whose further details may appear during both sessions.
In the proposed addition to the law, China would forbid the AD-HOC fine collection from companies, The state media said this week.
Due to how the companies struggled with a series of extraction of fees, last year, public applications revealed that local self -governments asked companies pay off taxes at operations as early as 1994.
The new law would significantly contribute to giving companies “stable legal expectations”, said Bruce Pang, assistant professor at Chinese University of Hong Kong Business School. At a parliamentary meeting, he also expects new funds focusing on increasing investment capabilities for non -state enterprises and help in easier financing of companies.
Many analysts saw the presence of technological entrepreneurs at the last week's meeting with the XI as a strong signal that regulatory repression for Internet companies has come to an end.
This shows that “the state is willing to demonstrate regulatory relaxation towards technology companies, saving them serious repression, in exchange for investments in innovation in critical technologies,” said Chim Lee, a senior analyst at Economist Intelligence Unit.
China Anti -corruption probe of government officials However, the management of state companies for illegal behavior is still ongoing. Over 40 people were removed, mainly on charges of corruption, as delegates of the National Congress of the Congress Since the current date began in 2023According to CNBC calculations Official data.