Daily Management Review

China's Government Advisors Want Greater Stimulus And Steady Growth Objective In 2024


China's Government Advisors Want Greater Stimulus And Steady Growth Objective In 2024
Aiming to create jobs and maintain long-term development goals, Chinese government experts will suggest 4.5% to 5.5% economic growth targets for the upcoming year to an annual policymakers' conference.
Speaking with Reuters, five of the seven advisors expressed their preference for a target that is similar to this year's objective—roughly 5%. One advisor will prescribe a 4.5% goal, while the other a range of 5.0–5.5%.
The recommendations will be presented at the annual Central Economic Work Conference of the ruling Communist Party next month, which covers policy objectives and the forecast for the second-largest economy in the world.
The advisers stated that in light of the fact that last year's low-base effect of COVID-19 lockdowns flattened this year's growth, Beijing would need to increase fiscal stimulus to reach such aims.
"We need to adopt expansionary fiscal and monetary policy to stimulate aggregate demand," Yu Yongding, a government economist who advocates for a growth target of roughly 5%, told Reuters.
"Corporate investment demand will not be strong as the confidence of companies has not recovered, so we need to expand infrastructure investment," added Yu, who also favours a budget deficit topping 4% of economic output.
Because the meetings were behind closed doors, the other advisers only commented on condition of anonymity. The goal will not be made public until China's annual parliament meeting, which is typically held in March, but it is anticipated that top leaders would support it at the meeting in December.
China announced in October that it would issue 1 trillion yuan ($139 billion) in sovereign bonds by the end of the year, increasing the budget deficit target for 2023 from 3% to 3.8% of GDP.
China's authorities have promised to "optimise the structure of central and local government debt," implying that since the national government's debt is just 21% of GDP, it can afford to spend more than local governments, which have debt of 76%.
"We are stepping up fiscal policy support," said another adviser, to make the "difficult" 2024 target "achievable."
Since the central bank is still worried that the yuan could weaken even more and stimulate capital outflows due to a growing interest rate disparity with the West, monetary stimulus is likely to play a more limited role.
"The space for monetary policy could be bigger if we have greater tolerance for exchange rate fluctuations," said Guan Tao, global chief economist at BOC International and a former official at the State Administration of Foreign Exchange (SAFE).
In 2022, China's GDP expanded by just 3%, which was among the poorest showings in almost 50 years. Economists predict it will rise by 5.0% in 2023 and 4.5% in 2024, according to a Reuters poll conducted in October. However, several have subsequently revised up their projections.
At a major party conference in 2022, President Xi Jinping unveiled his long-term plan for "Chinese-style modernization." According to official analysts, this would entail average annual growth of 4.7% in order to double China's economy by 2035.
Many commentators have called for structural reforms to shift the drivers of economic growth away from property and infrastructure investment and towards household spending and market-allocation of resources, in response to the sluggish post-COVID recovery.
In the absence of that, some economists caution, China might later this decade flirt with stagnation a la Japan.
Beijing has been attempting to shift its economy away from property by investing more in green and high-tech manufacturing, but it has had trouble improving investor and consumer confidence.
Insiders in the field of policy analysis speculate that the current political climate, in which the government has expanded its authority over all aspects of the economy, including the private sector, makes additional significant changes, particularly a return to market-oriented reforms, impossible.
"If there is no consensus on reforms, we will have to use stimulus to drive growth, even though it will not be sustainable,” a third adviser said.