(Bloomberg) -- Chinese President Xi Jinping reiterated a call to achieve the country’s annual economic target, signaling a growing sense of urgency ahead of a key legislative meeting expected to approve new fiscal support for the world’s No. 2 economy.
The Chinese leader told senior party officials on Tuesday to fully implement a package of existing and new policies in the next two months, the People’s Daily reported. It was at least the fourth time in two months Xi openly emphasized a need to reach the goal of expanding the economy around 5% this year.
The exhortations suggest the party is intent to draw a line under the slowdown. The latest call represents Xi’s first comments on the economy after third-quarter data released this month showed the economy grew the least since March 2023 and extended its worst deflation streak since 1999.
Economists have been debating whether a meeting next week of the Standing Committee of the National People’s Congress, the top legislative body, will allow fresh government borrowing and spending after officials in September unleashed the boldest stimulus package since the pandemic.
The weeklong session coincides with the US election. Chinese lawmakers are expected to announce any new spending plans on the last day of the meeting, Nov. 8, three days after a poll that could reelect former President Donald Trump, who has suggested 60% tariff on all exports from China that would disrupt a rare bright spot in the Chinese economy.
Bloomberg News has reported that authorities are considering selling 6 trillion yuan ($853 billion) in bonds through 2027 mainly to refinance local governments’ off-balance-sheet debt. Reuters on Tuesday said Beijing may issue 4 trillion yuan worth of debt to fund government purchases of idle land and properties, bringing the size of the fiscal package to over 10 trillion yuan.
“10 trillion yuan is a welcome number,” said Tommy Xie, head of Asia macro research at Oversea-Chinese Banking Corp. “But there is also a lack of details on how China will support domestic demand.”
Serena Zhou, senior China economist at Mizuho Securities Asia Ltd., said it would be difficult for China to hit 5% growth this year, although 4.8% or 4.9% is possible and would be considered within the target range.
A key question is whether fiscal policies, seen as the most critical piece of the puzzle, will be forceful enough to tackle weak domestic consumption and a housing downturn that threaten to sink the country into a deflation spiral.
Central bankers and government officials on the sidelines of the IMF and World Bank’s annual meetings in Washington last week warned that China hasn’t done enough to improve sluggish demand and deal with problems like overcapacity. The IMF forecast the Chinese economy to grow 4.8% in 2024.
The fiscal plan will likely focus on resolving local debt risks instead of shoring up growth, according to Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd.
“There are only two months left this year, and it would take at least six months for fiscal stimulus to be implemented from being announced,” he said, adding that the fiscal budget next year could still be expanded significantly to boost the economy.
--With assistance from Rebecca Choong Wilkins, Jing Li and James Mayger.
©2024 Bloomberg L.P.
