China prepares for two meetings to increase fiscal deficit | Real Time Headlines

China is expected to acknowledge a significant softening of domestic demand next week, while revealing Highly anticipated details about fiscal stimulus Faced with the increasing growth in U.S. trade tensions.

The country’s annual parliamentary gathering, known as the “two meetings”, began on Tuesday, with the Chinese people’s political advisory meeting – the Supreme Advisory Body – followed by a meeting of its legislature, the National People’s Congress.

The gatherings have lasted for about a week in recent years, followed by a press conference with the foreign minister and head of the economic sector.

Beijing is expected to lower its annual consumer price inflation target to around 2% at the opening ceremony of NPC on Wednesday – The lowest in more than two decades – According to the Asian Institute of Social Policy, 3% or more from previous years.

This marks an implicit awareness of humble domestic demand.

The new inflation target serves as a cap more than the target achieved. China has been under pressure to shrink, with nominal GDP growing at a slower rate than Royal GDP than in the seventh quarter of the last quarter of 2024 Macquarie’s chief Chinese economist Larry Hu said in a report. Consumer Price Only climbed 0.2% in 2024 and 2023although Producer prices Rejected for more than two years.

“Our paper this year will be durable,” Morgan Stanley chief Chinese economist Robin Xing told CNBC earlier this month. “China will try some new approaches, but … they will try to take small steps.”

Xing said it is unlikely that Beijing will significantly increase stimulus until the second half of the year, as social discontent with the slowdown may become more common. He noted how the September stimulus announcement was issued more than a year after the ventilation trend first appeared.

Investors are watching Beijing’s efforts to address the country’s economic slowdown, an unexpectedly advanced one. September’s support commitment Promote stock rally. After the Chinese president, market gains again Xi Jinping Hold Rare meeting with entrepreneurs last week Including Alibaba’s Jack MA and DeepSeek’s Liang Wenfeng.

Macquarie’s nonsense said Beijing could place its budget deficit on Wednesday as 4% of GDP, up from 3% in 2024, echoing overall market expectations.

Hu said this would mark a meaningful shift in the years that policy makers have been reluctant to violate the 3% (deficit) threshold.

He also expects China to sell special sovereign bonds to reach 3 trillion yuan (US$410 billion) this year, from 1 trillion yuan in 2024, and increase the annual quota for special local government bond issuance to 4.5 trillion yuan of 4.5 trillion yuan.

China was also widely expected to set its annual GDP growth target at “about 5%” on Wednesday, the same as in the past two years. This will be consistent with Xi Jinping’s previously announced goals By 2035, the economy will roughly double.

But analysts warn that Beijing cannot go all out given trade tensions with the United States abolishing technical restrictions, with U.S. President Donald Trump raising tariffs on Chinese goods by 10%, and April 2, more responsibilities may be.

This will become an export, a rare highlight in China’s economy.

“For any major policy stimulus, March is still too early, as policymakers need more time to see the actual impact of the trade war 2.0,” Macquarie’s beard said. “Their records show that they can’t miss GDP growth targets, but they don’t want to override them either. At this point, they will keep the cards close to their chests.”

The highly anticipated conference in Beijing will be with Trump’s speech at a joint Congress meeting On March 4, the U.S. president may abide by his agenda and his goals for the year.

The world’s second largest economy 5% growth in 2024retail sales growth dropped sharply from 7.1% in 2023 to 3.4%. Real estate drag-and-drop continued, with investment in the industry down 10.6% last year.

“We believe the government may prioritize ‘boosting consumption’ as a major policy task in the NPC meeting,” Wang Wang, UBS Investment Bank’s chief Chinese economist said in a report.

China is trying to use trade subsidies to promote consumption to encourage the purchase of selected goods. Authorities in January Expanded trade plan Includes smartphones and more household appliances, and provide detailed information on the size of subsidy support that should be available at both meetings.

UBS’s Wang said that due to the large budget deficit, Beijing could increase the scale of its consumer trade program to 300 billion yuan in subsidies from last year.

She also hopes that the government will address income concerns by subsidizing families with young children, increasing pension spending and increasing the state’s contribution to China’s residents’ insurance plans.

At the upcoming meeting, China is also expected to release its spending plans for defense and technology development in the coming year.

Beijing will begin formalizing its priorities for the next fifty years this fall, called “Five-year plan. “The current ends this year.

In China’s system dominated by the Communist Party, these two meetings are not traditional places for drastic policy changes. Instead, setting directions usually occur at high-level party meetings, e.g. The third world, last held in July 2024.

XI’s meeting with entrepreneurs last week, and new policies supporting the private sector foreign investment Markus Herrmann Chen, co-founder and managing director of China Macro Group, said that after the third global group, Markus Herrmann Chen said. “Symbolically, this marks a quick and good start to reform and sends out a signal of reform in Beijing’s pipeline,” he said.

In the proposed legal supplement, China will prohibit the collection of temporary fines from enterprises. State media said this week.

To show how businesses struggle with multiple charges, last year’s public documents show that cash-strapped local governments have asked companies to Repay taxes About the operation in 1994.

Bruce Pang, associate professor at the University of China at the Hong Kong Business School, said the new law will go a long way toward “stable legal expectations” for businesses. At parliamentary meetings, he also expected new measures to focus on increasing investment opportunities for non-state enterprises and to help small technology companies gain access to financing.

Many analysts saw the presence of tech entrepreneurs at their meeting with XI last week, a strong signal that the regulatory crackdown on Internet companies has officially ended.

This shows that “the state is willing to show technology companies the spaciousness of regulatory leniency, avoiding their major repression in exchange for their investment in key technological innovations,” said Chim Lee, senior analyst at the Economic Intelligence Division.

China’s Anti-corruption investigation by government officials However, illegal acts by state-owned companies are still underway. More than 40 representatives of the National People’s Congress have been removed from office, mainly on corruption charges Starting in 2023 since the current semestercalculated according to CNBC Official figures.