Economic Recovery and Market Update
According to state media CCTV, a senior official from the Communist Party of China has advised the government to set appropriate fiscal deficit and special local government bond levels in 2024, while also optimizing the structure of fiscal spending. This recommendation follows an important meeting where top leaders pledged to make policy adjustments to support China’s economic recovery in the upcoming year.
However, blue-chip stocks experienced a slight dip of nearly 0.5% on Wednesday, and Hong Kong’s Hang Seng index slid 0.8%. Investors are closely monitoring Beijing’s announcements for further policy support indications.
Stabilizing Consumer Prices
During an economic forum, Han Wenxiu, the deputy head of the Communist Party’s office for financial and economic affairs, emphasized the importance of maintaining moderate and appropriate consumer price levels. “The price level is a macroeconomic thermometer – neither too high nor too low is good,” noted Han. He projected that China’s consumer price index (CPI) would rise by 0.4% this year compared to the previous year.
Since the second quarter, China’s economy has been losing momentum due to various challenges such as mounting local government debt, a sluggish housing market, and weak domestic and international demand. To support the economic recovery, China announced a mid-year adjustment in October, raising its 2023 budget deficit target from 3% to 3.8% of the gross domestic product (GDP). Additionally, the government revealed plans to issue 1 trillion yuan ($139.23 billion) in sovereign bonds.
As the consumer price level remains low and the central government’s debt level is manageable, Han expressed confidence in the fiscal and monetary policies. He highlighted the importance of optimizing the structure of fiscal spending, improving the efficiency of fiscal funds utilization, and enhancing policy effectiveness in 2024.
Addressing Risks and Promoting High-Quality Development
CCTV’s report also mentioned that China should coordinate efforts to address risks related to the property sector, local government debt, and small and medium-sized financial institutions. Han emphasized the need for regions with low debt risks to expedite high-quality development.
On Friday, the national bureau of statistics is set to release major economic indicators for November, including figures for industrial output, retail sales, and the jobless rate. Investors and analysts will closely watch these indicators for further insights into China’s economic performance.