China to Unleash More Stimulus Following Two Sessions: ICBC

Bloomberg Television
5 Mar 202404:13

TLDRMichael Pettis discusses the National People's Congress work report, highlighting the emphasis on fiscal stimulus and the ambitious 5% growth target. He notes surprises such as the special local government bond and the new numerical target for energy consumption reduction. Pettis emphasizes the government's focus on modernizing the supply chain, promoting high-quality development, and boosting domestic consumption. He also addresses the challenges in reviving consumer sentiment and the government's policy tools, as well as the realistic risks of deflation in China and the global implications of its inflation target.

Takeaways

  • 📝 The National People's Congress report did not contain any significant surprises, but emphasized fiscal stimulus, including a special local government bond of 100 billion.
  • 🔄 The report introduced a new target for reducing per capita energy consumption by 2.5%, which was not numerically targeted in the previous year.
  • 🚀 The government has set an ambitious growth target of maintaining a 5% growth rate, which is becoming increasingly challenging.
  • 🛠️ The top priorities for China's authorities are modernizing the supply chain, focusing on high-quality development, and encouraging domestic consumption.
  • 💡 Reviving consumer sentiment in China is a key challenge, with policy tools and timing being crucial for restoring confidence and stimulating investment.
  • 🏠 The property sector is particularly important for lifting market sentiment, with recent supportive measures indicating policy backing.
  • 📉 There is a mismatch between market expectations for short-term support and policymakers' focus on long-term gains.
  • 🔄 Inflation is a concern for officials in Beijing, who have set a target of 3%, but deflation and disinflation risks are also present due to widespread price cutting.
  • 🌐 The impact of price cutting in China may be offset by increasing consumption, which could have global implications for prices.
  • 📋 After the sessions, more policies are likely to be announced and implemented by various ministries to address the outlined challenges and targets.

Q & A

  • What was Michael Pettis' opinion on the National People's Congress work report?

    -Michael Pettis believed there were no surprises and no meaningful solutions in the work report.

  • What was the special local government bond amount mentioned for the year?

    -The special local government bond amount mentioned was 100 billion.

  • What was the new target for per capita energy consumption?

    -The new target for per capita energy consumption was a reduction of 2.5%.

  • How does the speaker view the 5% growth target?

    -The speaker sees the 5% growth target as ambitious due to the increasing difficulty of maintaining it and the emphasis on quality over GDP growth.

  • What are the top three priorities highlighted in the government work report?

    -The top three priorities are modernizing the supply chain, focusing on higher quality development, and encouraging domestic consumption.

  • What has been a long-running aim for officials in Beijing?

    -Developing domestic consumption has been a long-running aim for officials in Beijing.

  • What has been the mismatch of expectations in 2023?

    -The mismatch of expectations in 2023 has been between markets looking for short-term support and policy makers focusing on long-term gain.

  • What sector has been particularly important for lifting market sentiment?

    -The property sector has been particularly important for lifting market sentiment.

  • What is the inflation target set by officials in Beijing?

    -Officials in Beijing have set an inflation target of 3%.

  • How does the speaker view the risks of deflation and disinflation in China?

    -The speaker believes the risks of deflation and disinflation in China are realistic, with price cutting being widespread, but also suggests that base effects may lead to a moderate increase in CPI inflation.

  • What global implications might the price cutting in China have?

    -The speaker suggests that the impact of price cutting in China might be offset by increasing consumption, which could have implications for global prices.

Outlines

00:00

📝 Fiscal Stimulus and Economic Targets

The paragraph discusses Michael Pettis's view on the National People's Congress work report, highlighting the lack of surprises and meaningful solutions. It emphasizes the focus on fiscal stimulus, with a special local government bond of 100 billion and the necessity of fiscal support to complement monetary policy easing. The surprise element of the report includes a new numerical target for per capita energy consumption reduction. The paragraph also addresses the ambitious growth target of maintaining a 5% growth rate, the government's ten key elements from the work report, and the importance of domestic consumption and investment. It touches on the mismatch of market expectations and policy maker's long-term goals, the property sector's impact on market sentiment, and the timing and targeting of policy tools. Lastly, it discusses the concern of deflation in China, the set inflation target of 3%, and the potential global implications of price cutting in China.

Mindmap

Keywords

💡National People's Congress

The National People's Congress (NPC) is the highest state body and the only legislative house in the People's Republic of China. In the context of the video, the NPC's work report is being discussed for its lack of surprises and meaningful solutions. The NPC sets the tone for China's economic policies, which is a central theme of the video.

💡Fiscal Stimulus

Fiscal stimulus refers to government spending and tax cuts designed to boost economic growth. The video mentions a special local government bond of 100 billion as an example of fiscal stimulus, which is intended to supplement monetary policy easing. This concept is key to understanding the government's approach to economic management.

💡Per Capita Energy Consumption

This term refers to the average energy consumption per person within a given area. The video highlights a target reduction of 2.5% in per capita energy consumption as a surprise element from the report, indicating a focus on sustainability and efficiency in energy use.

💡Growth Target

A growth target is a预定的 economic growth rate set by a government or economic body. The video discusses the ambitious nature of maintaining a 5% growth target, which reflects the challenges of sustaining economic expansion in the face of increasing difficulties.

💡Modernized Supply Chain

A modernized supply chain is one that is efficient, technologically advanced, and capable of adapting to changes in demand. The video emphasizes the importance of a modernized supply chain as a top priority for Chinese authorities, highlighting the need for domestic brands and production models to enhance the capacity of supply in China.

💡Quality Development

Quality development focuses on improving the standard and sustainability of economic growth rather than just increasing GDP. The video mentions this as a key element of the government work report, indicating a shift from quantity to quality in economic development strategies.

💡Domestic Consumption

Domestic consumption refers to the spending by residents of a country on goods and services produced within that country. The video discusses the importance of encouraging domestic consumption to boost the economy, which is a long-standing aim of Chinese officials and a key challenge for the authorities.

💡Consumer Sentiment

Consumer sentiment measures the overall outlook of consumers towards the economy, their personal financial situation, and spending. The video mentions that consumer sentiment in China has been negatively affected, which is crucial for understanding the government's policy tools aimed at reviving confidence and stimulating the economy.

💡Property Sector

The property sector is a significant part of the economy involving real estate development and investment. The video notes the importance of this sector in lifting market sentiment, with supportive measures being implemented to ensure policy support and stability in the market.

💡Deflation

Deflation is a decrease in the general price level of goods and services. The video discusses deflation as a concern for officials in Beijing, who have set an inflation target of 3%. The discussion on deflation and disinflation reflects the challenges of balancing economic growth with price stability.

💡CPI Inflation

CPI inflation, or Consumer Price Index inflation, measures the percentage change in the prices of consumer goods and services over time. The video mentions the possibility of a moderate increase in CPI inflation due to base effects, which is important for understanding the government's inflation target and its implications for economic policy.

Highlights

Michael Pettis comments on the National People's Congress work report

No surprises or meaningful solutions from the work report

Annual sessions expected to be surprising, with the central economic tone already set

Emphasis on fiscal stimulus, with 100 billion in special local government bonds

Reduction in per capita energy consumption target set at 2.5% lower

Growth target of 5% is ambitious due to increasing difficulty

Government work report highlights ten elements, with modernized supply chain as top priority

Focus on higher quality development rather than just GDP growth

Encouraging domestic consumption as a key challenge and target

Mismatch of expectations between markets and policy makers in 2023

Policy measures in the property sector to lift market sentiment

Inflation target of 3% set by Beijing officials

Realistic risks of deflation and disinflation in China

Price cutting observed in China, but potential for consumption increase to offset

Global implications of price cutting from China

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