5% Growth Uncertain... Up to 10 Trillion Yuan Stimulus Expected
US Election Results to Influence Stimulus Size
The Standing Committee meeting of the National People's Congress (NPC, equivalent to the National Assembly) of China opened on the 4th. Attention is focused on whether the authorities will launch large-scale fiscal support to achieve the growth rate target of 'around 5%', while the outcome of the U.S. presidential election is expected to act as a variable.
On the same day, China's state-run Xinhua News Agency announced that the 12th meeting of the 14th NPC Standing Committee had begun.
As the economic downturn in China prolongs and prospects for achieving the economic growth target become uncertain, the market is closely watching the scale of fiscal expenditure to be announced by the Chinese authorities. The NPC has the authority to approve the central government's economic stimulus policies.
Experts inside and outside China forecast that the fiscal expenditure approved by the NPC Standing Committee will range between 1 trillion and 3 trillion yuan (194 trillion to 581 trillion won). However, there are opinions that more than 4 trillion yuan (approximately 774 trillion won) in stimulus measures may be necessary, similar to the 2008 global financial crisis.
Liang Zhong, chief researcher at the Bank of China, said that while the authorities may not announce specific figures, if they do, it would be over 4 trillion yuan.
Earlier, major foreign media reported that a stimulus package worth 10 trillion yuan (approximately 1,936 trillion won) is expected. Market analyses also suggest that up to 10 trillion yuan in spending over three years is needed to revitalize the economy hit by a prolonged real estate slump.
China's economy showed an upward trend with growth rates of 4.9% in Q3 last year, 5.2% in Q4, and 5.3% in Q1 this year, but slowed to 4.7% in Q2 and 4.6% in Q3. The growth rate for Q1 to Q3 was 4.8%, and experts predict that if this trend continues, it will be difficult to achieve the 'around 5%' economic growth target.
In response, the authorities have introduced various stimulus measures since the end of September, including interest rate cuts and support for the real estate and stock markets. However, criticism has been raised that the effectiveness is low due to the lack of disclosure of specific schedules or scales.
Chinese state media are likely to report the results of the meeting on the closing day of the NPC on the 8th.
Foreign media believe that the Chinese authorities postponed the NPC schedule this month considering the U.S. presidential election on the 5th. The NPC Standing Committee usually meets once every two months, in even-numbered months. The 14th NPC Standing Committee decided at the end of last month to hold the 12th meeting from the 4th to the 8th.
Lu Ting, chief China economist at Nomura Securities, predicts that the overall fiscal support from the authorities will amount to 2-3% of China's gross domestic product (GDP) over the coming years. He expects it to approach 3% if former President Donald Trump wins, and close to 2% if Vice President Kamala Harris is elected.
Bloomberg News stated that if former President Donald Trump, who pledged to impose a 60% tariff on Chinese imports, wins, China will need to strengthen efforts to expand domestic demand.
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