China pledges continued support for business community in 2024

The Chinese government is to continue to roll-out support in 2024 through its macroeconomic policy, according to delegates at the annual Central Economic Work Conference held recently in Beijing

At the conference, Chinese leaders decided the priorities for policy in 2024, based on the economic principle of ‘promoting stability through progress’. Delegates called for intensifying macro regulation to both expand domestic demand and deepen supply-side structural reform. They also called for more measures to reduce interest rate levels.

Gong Liutang, a professor of applied economics at Peking University’s Guanghua School of Management and a member of the 14th National Committee of the Chinese People’s Political Consultative Conference, said the idea of ‘promoting stability through progress’ indicates that policymakers are placing more emphasis on maintaining a reasonable GDP growth rate in 2024.

“Such a stance will help bolster confidence, stabilize employment, mitigate risks and boost people’s income growth, which will in turn amplify the role of consumption in driving the economy,” said Gong. He added that a GDP growth target of around 5% would be appropriate for 2024.

“Fiscal and monetary policies should be harmonized to achieve that goal,” Gong said, stressing that there is an urgent need to reduce interest rate levels, which is increasing companies’ cost of servicing their debt. This, in turn, makes them reluctant to invest in new projects.

The People’s Bank of China, the country’s central bank, is likely to cut interest rates in the first quarter next year, when the economy needs support amid global economic downward pressures while low inflation provides room for easing, said Zheng Houcheng, chief macroeconomist at Yingda Securities.

Ivan Gonzalez, CEO of reinsurance and country president of Swiss Re China, said the Chinese government has some flexibility from a policy perspective to cope with external and domestic challenges, which could help China’s economy grow by around 4.5% in 2024.

 

Consumer price fall ‘shows consumer demand still weak’

Consumer prices in China fell for the second consecutive month in November, indicating demand is still weak, economists said at a recent meeting of the Political Bureau of the Communist Party of China Central Committee.

A statement from the Bureau said that the economists believe that despite challenging economic conditions, there was optimism over the potential for growth next year given recent signs of stabilization. They expect to see more measures rolled out to boost domestic demand, spur consumption and help local governments get on the right financial track.

The statement said the meeting “emphasized the need to consolidate and enhance the momentum of economic recovery, and strive to promote overall improvement in economic operations to achieve both qualitative and quantitative growth”.

Data released by the National Bureau of Statistics at the start of December indicated the pressures facing the economy, as the country’s consumer price index (CPI) – a main gauge of inflation – dropped by 0.5% year-on-year in November after a 0.2% dip in October.

The growth in core CPI, which excludes food and energy prices, came in at 0.6% year-on-year in November, the same as October.

Xiong Yuan, chief economist at Guosheng Securities, said the drop in consumer prices indicates the still-weak internal demand and was a sign of low confidence, leaving open the possibility of further interest rate cuts.

“Although the economy is gradually stabilizing, the foundation for recovery is not yet solid,” Xiong said. “More policy support is likely this year.”

Citing the negative CPI growth and the steps mapped out at the key meeting, Wen Bin, chief economist at China Minsheng Bank, said that expanding domestic demand will be among the key priorities to bolster the economy, and consumption will play a fundamental role in driving economic growth.

“It is essential to expand consumption by increasing household income,” Wen said. “Efforts should be made to stimulate purchases of big-ticket items, such as cars and electronics, while promoting consumption in services such as sports, leisure and cultural tourism.”