China: Looking beyond the NPC meetings

With 2024 growth risk ebbing, we think the policy focus has shifted to 2025. The Standing Committee of the NPC may approve bank recapitalisation and local debt swap plans, but we see low probability of a budget revision for 2024. Additional fiscal stimulus to counter external risks will likely be planned at the December CEWC, Standard Chartered’s economists Shuang Ding and Hunter Chan notes.

In no hurry to respond to the US election

“China’s policy makers will likely reserve their firepower for next year as growth risks have decreased. The mid-October fiscal package made CNY 1.4tn additional spending possible in Q4, reducing downside risks. The official PMI returned to expansionary territory in October, consistent with the Caixin PMI and our SMEI survey, boding well for an activity rebound in Q4. We now see upside risk to our 2024 growth forecast of 4.8%. Senior government officials have recently become more confident in achieving the growth target of 5%.”

“The Standing Committee (SC) of the National People’s Congress (NPC) will conclude its session on 8 November, immediately after the US presidential election. Many market participants expect the SC to approve additional fiscal stimulus (including revising the 2024 budget), with the size of stimulus dependent on the US election outcome. We expect the SC to approve a CNY 1tn special central government bonds (CGBs) quota to replenish capital at six major banks, and a local special bonds quota of CNY 6-10tn for the debt swap to be used over 3-5 years. We see a below-50% chance of the 2024 CGB quota being increased. The government may wait until the Central Economic Work Conference (CEWC) in December to tackle external risks in a comprehensive way.”

“If Harris wins the election, we expect China’s narrowly defined official budget deficit to be widened to 3.5% of GDP (CNY 4.8tn) in 2025 from an effective 3.4% (CNY 4.5tn) this year. In case of a Trump win, another CNY 1-2tn of spending (c.1% of GDP) will likely be added to offset a potential increase in US tariffs on imports from China.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.