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China’s National People’s Congress set the country’s growth target at around 5%. Here’s what analysts are saying in response:
JPMorgan: Analysts there emphasized that the target is usually determined well before the NPC meeting, in December. “The evolvement between December and March usually will not affect the growth target (with perhaps the only exception that no growth target was announced in 2020 after the COVID outbreak). Back in December, ‘around 5%’ was clearly not a conservative growth target and it shows the emphasis on growth stabilization and growth quality,” they said.
Societe Generale: “The growth target of c.5% may seem underwhelming, but we see it as a strategy of ‘aiming low and overachieve’ by the upcoming new government team, rather than lack of confidence among policymakers,” says the French bank, which adds that there’s no visible step up in either fiscal or monetary easing. “Essentially, the biggest stimulus to the Chinese economy this year is the end of zero-COVID and COVID, and the second biggest is a more pragmatic policy stance toward real estate and internet platforms, which is reconfirmed in the NPC reports.”
TD Securities: “Earlier, we highlighted that this was an easily achievable target, but authorities appear to be curbing expectations of further stimulus rollout. Other economic targets were broadly similar to last year: fiscal deficit at 3% (2022: 2.8%), special local government bond quota at CNY3.8tn (2022: CNY3.65tn), jobs creation at 12mill (2022:>11mill) and CPI inflation at around 3% (2022:3%),” they said. The reopening-driven rally is losing traction, “and authorities taking off the possibility of strong monetary and fiscal help suggest more headwinds for equities,” TD said.
UBS: “Both the growth target and policy tone are in line with our baseline assumption, but may disappoint some market participants who had hoped for more,” they say. UBS lifted its GDP growth view to 5.4% from 4.9% for 2023 and its 2024 GDP view to 5.2% from 4.8%. They say the reopening is proceeding better than expected, that U.S. and European economies are more resilient than expected, and see potential upside from increased quasi-fiscal policy support, including more lending from policy banks.
The Shanghai Composite
SHCOMP,
slipped 0.2% on Monday, while the Hang Seng
HSI,
edged up 0.2%, underperforming bigger moves seen in Tokyo and Seoul. Alibaba’s
BABA,
U.S.-listed shares rose 1%.
