Mar 5, 2023

Here Is What Market Watchers Are Saying About China’s NPC

Bloomberg News, Bloomberg News

(Bloomberg) -- China’s modest growth target suggests authorities are comfortable with the current pace of recovery with the focus turning to upgrading the quality of key industries, market watchers say.

Policy statements released during the National People’s Congress show the nation will prioritize growing the digital economy, achieving technology self-reliance and boosting the reform of state-owned enterprises. Meanwhile, the rhetoric around supporting the property sector was largely unchanged.

The 5% growth target for this year should be seen as a base line rather than a goal, according to some analysts who said investors shouldn’t be too discouraged. As the NPC continues, all eyes will be on a suite of leadership changes and a reshuffling of government agencies.

Onshore Chinese shares, which had rallied ahead of the NPC on policy bets, retreated Monday. The CSI 300 fell as much as 1%. Shares connected to SOE reforms rallied, with China Satellite Communications Co. up as much as 10%. A Hang Seng gauge of Chinese shares fell.

Here are some comments from market watchers:

Shanghai PD Fortune Asset Management (Zhang Fushen, senior analyst)

The biggest takeaway is “no strong stimulus this year,” suggesting that authorities are satisfied with the pace of recovery
“The only viable trades” will be in the growth sectors around tech, innovation, chips software

Societe Generale SA (Wei Yao, economist)

“The growth target 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”
The government report confirmed a more pragmatic policy stance toward real estate and internet platforms

Chanson & Co. (Shen Meng, director)

A 5% target is actually a more reasonable and healthier target, better for curbing systemic risks. Such a target not only gives the government more flexibility in its policies but also ensures room for structural industrial reform

UOB Kay Hian (Hong Kong) Ltd. (Steven Leung, executive director)

The Chinese government doesn’t want to be pushing the economy too aggressively, likely due to a lot of uncertainties from the US and Europe
Markets will find these policies and the GDP target acceptable; investors are watching closely what the Fed chair says this week, so it’s still wait and see for news from the US
Telcos are also doing especially well because of the announcements on 6G

Pinpoint Asset Management (Zhiwei Zhang, president and chief economist)

“Given the complete reshuffling of the government, a key issue to watch in the next few months is how the new leaders will boost private sector confidence. This is more important than the fiscal and monetary policies”
The growth target came in at the lower end of the market expectation but should be taken as a floor that the government is willing to tolerate

Jefferies Financial Group Inc (Edison Lee and others)

The government stressed growing the digital economy and achieving tech localization along with other major goals including achieving 5% GDP growth target
“SOE reform seems to have received a big focus, which likely explains the recent southbound-driven rally of telco-related stocks”
- The government pledged to improve SOEs’ core competitiveness and balancing their economic and social obligations
“We see telco ecosystem, software and IDC as key beneficiaries”

Citigroup Inc. (Griffin Chan and others)

“Property was not a focus in the 2023 work report” while the overall tone was gentle and supportive
Given recognition of systematic risks for property and a focus on downside protection, expect credit-side supports to be enhanced and demand-side easing to continue to drive basic/upgrade housing purchases
See bottom line for policy is for home price growth in-line with nominal GDP growth

Global Cio Office (Gary Dugan, chief executive officer)

The government highlighted consumption as the key driver for growth in 2023 and is likely to ensure that consumer confidence is maintained through targeted support of the housing market
“We retain our constructive view of Chinese equities with a focus on domestic plays, particularly consumer related”

Shanghai Zige Investment Management (Wang Huan)

“The wording around real estate seems to suggest that the worst of the risks are behind us”
The upgrade of industries and tech innovation should remain the priority in the years to come, and see great policy determination to refrain from turning back to the old drivers of growth

MX Capital (Xu Yining)

“The measures to regulate the industry will go on, with stability in the sector to be the theme this year”
Expect stimulus for property to be rather restrained