China has announced plans to increase policy modifications in order to stimulate economic growth by 2024.
According to state media, China plans to increase policy changes in order to aid an economic rebound in 2024. This decision was made during a key meeting of the country’s leaders.
Investors are paying close attention to hints about the policy and reform plans for next year. Beijing is facing challenges in reviving the economy after the pandemic, as well as dealing with a housing crisis and increasing debt at the local government level.
According to state media, China plans to prioritize increasing effective demand in the coming year and will work together to stimulate domestic demand. This information was reported from the annual Central Economic Work Conference, held from December 11th to 12th, where top leaders established economic goals for 2024.
Top officials, led by President Xi Jinping, stated in a meeting that there is a need to implement additional policies that will promote stable expectations, growth, and employment. This was reported by state media.
“We must enhance counter-cyclical and cross-cyclical measures in macro policies, maintain a proactive fiscal policy and a cautious monetary policy, and improve innovation and coordination in policy tools.”
The highest governing body of the Communist Party, known as the Politburo, announced on Friday that fiscal strategy will be strengthened to a moderate degree and will aim for flexibility, moderation, accuracy, and effectiveness in order to boost economic growth.
According to state media, China intends to enact changes to taxes and fees in order to reduce their impact, as well as implementing new fiscal and tax reforms. The government also aims to enhance the allocation of fiscal funds to support important initiatives.
According to state media, China will keep an appropriate amount of liquidity in order to match the desired targets for economic growth and price levels, while also ensuring sufficient social financing and money supply.
The Chinese government plans to direct financial institutions to provide more assistance for advancements in technology, environmentally-friendly improvements, small and micro businesses, and the digital economy.
Analysts predict that the government will use fiscal stimulus, specifically investing in infrastructure, to boost economic growth. This is because the central bank is currently constrained in its ability to implement policy changes, as it is worried about potential capital outflows.
In October, China announced a proposal to release 1 trillion yuan ($139 billion) in government bonds by the end of this year, increasing the 2023 budget deficit goal to 3.8% of GDP from the original 3%.
According to Nie Wen, an economist at Hwabao Trust, the fiscal strategy will center on stabilizing investment in order to counteract the decrease in real estate and demand from external sources.
It is anticipated that the reserve requirement ratio (RRR) and interest rates will be moderately reduced.
On December 12, 2023, Xinhua News Agency released a photo of Chinese President Xi Jinping delivering a speech at the yearly Central Economic Work Conference in Beijing.
2024 Growth target eyed
The highest-ranking officials also promised to “promote stability through advancement,” which could indicate a stronger focus on expansion, and “build before tearing down,” which may suggest increased assistance for the struggling real estate industry.
According to state media, in order to boost economic recovery, we must address various obstacles and challenges. These include inadequate consumer demand, excessive capacity in certain industries, low public confidence, and numerous concealed risks.
Recently, Moody’s, a ratings agency, issued a warning of a downgrade for China’s credit rating. This is due to the expenses of rescuing heavily indebted local governments and state-owned enterprises, as well as managing the country’s property crisis, which will negatively impact its economic growth prospects.
Before the meeting, officials from the government informed Reuters that they would propose a range of economic growth targets for 2024, including numbers between 4.5% to 5.5%. The majority of advisers were in favor of setting a target of approximately 5%, which is consistent with this year’s target.
According to sources, the government is considering setting a 5% growth goal for 2024. Achieving this target would likely require Beijing to increase stimulus measures, as this year’s growth has been boosted by the low-base effect of COVID-19 lockdowns from last year, analysts suggest.
Typically, top officials announce a growth objective during the December assembly, which is then made known to the public at the start of the yearly parliamentary session in March.
China’s economy is expected to meet the government’s goal of approximately 5% growth this year.
According to state media, China plans to accelerate the creation of a new approach to property development, hasten the building of affordable housing, and manage local debt risks while promoting stable growth.
Source: voanews.com
