INSIGHT: China 2024 growth target will require stronger stimulus measures
Nurluqman Suratman
06-Mar-2024
SINGAPORE (ICIS)–China is likely to need to introduce stronger stimulus measures to meet its official growth target of around 5% for this year given the country’s deep structural imbalances.
- Slumping property market and weak consumer spending remain major sore points
- Plans announced for additional bonds to support the economy
- Focus remains on innovation and tech-driven industry upgrades
Chinese Premier Li Qiang on 5 March delivered the 2024 government work report at the National People’s Congress (NPC) in which Beijing has set its GDP growth target at “around 5.0%” and its deficit-to-GDP ratio target at 3.0%, both unchanged from last year.
The world’s second largest economy expanded by 5.2% in 2023, its weakest annual rate for more than three decades.
ICIS analysts expect a rebound in China’s end-use consumption sectors, including agriculture and home appliances, starting in March.
New policies arising from China’s Two Sessions – yearly meetings where its legislature sets laws and its advisory body offers policy recommendations – on 4-11 March could potentially increase market and infrastructure investment, in turn boosting demand for petrochemicals.
China plans to
sell CNY1 trillion of ultra-long special
government bonds, the fourth such sale in the
past 26 years to shore up the economy, which
will continue to be issued over the next
several years to systematically address funding
shortages.
Last year, an additional CNY1 trillion of treasury bonds was issued to support post disaster recovery and reconstruction and build up capacity for disaster prevention, mitigation, and relief.
The Chinese government is targeting an unemployment rate of around 5.5% this year while aiming to add 12 million urban jobs.
Li also said that China will drop further restrictions on foreign investment into the country and “completely scrap” ceilings on foreign investment in the manufacturing sector but offered no specifics on other restrictions being eased.
Top Chinese officials have previously indicated cautious economic policy for this year, opting for targeted measures rather than massive stimulus due to systemic risk concerns and the less favorable comparison to 2023’s post-pandemic rebound.
Given a higher base effect with 2023’s growth benefitting from a low 2022 pandemic baseline, a troubled property sector, debt restrictions on high-risk provinces, potential slowdowns in new energy investment, and weak January-February data, achieving the GDP growth target seems very challenging, Japan’s Nomura Global Markets Research said in a note.
China’s manufacturing sector, which accounts for around a third of its economy, contracted for the fifth straight month in February.
“In general, there is a lack of policy surprise, and the key question remains on how policymakers could boost China’s GDP growth to around 5% this year,” said Ho Woei Chen, an economist at UOB Global Economics & Markets Research.
“However, the 5% growth target does suggest that China is prepared to do more to stimulate the economy if needed.”
The government is counting on tech innovations and industry upgrades as well as to refine its real estate policies to help stabilize the economic outlook, Ho noted.
In the major work tasks for 2024 section of the government work report, the top priority is to vigorously promote the construction of a modern industrial system and accelerating the development of “new quality productivity”.
China is also aiming to promote innovative development of its digital economy through the ‘AI Plus’ initiative while consolidating its leadership in industries like intelligent new-energy vehicles.
“While China may catch some manufacturing and export tailwind from the US re-acceleration, the key target for the Party is clearly to build a Chinese middle class that can support and drive the Chinese economy for the coming decades,” Mikkel Rosenvold, a geopolitical analyst at Steno Research, said in a note for investment research and analysis firm Smartkarma.
“In my view this will necessitate a complete shift in government focus from accelerating the real estate sector to continually focusing on putting more money in the hands of the consumers just as we have been doing in the West for the past 4-5 decades. This means stimulus, welfare programs and foreign investments, which was another focus of the speech.”
Insight by Nurluqman Suratman
Global News + ICIS Chemical Business (ICB)
See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.
Contact us
Partnering with ICIS unlocks a vision of a future you can trust and achieve. We leverage our unrivalled network of industry experts to deliver a comprehensive market view based on independent and reliable data, insight and analytics.
Contact us to learn how we can support you as you transact today and plan for tomorrow.
READ MORE
![](https://cjp-rbi-icis.s3.eu-west-1.amazonaws.com/wp-content/uploads/sites/7/2024/01/16170556/ContactUs_Services.jpg)