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The backstory: China, home to around 1.4 billion people, is dealing with a slower economic recovery post-COVID and a shrinking population. Challenges like a property crisis, local government debt risks, slow global growth and geopolitical tensions are weighing on the country's rebound. So, the government has rolled out various measures to jumpstart the economy. For example, the central bank has made modest interest rate cuts and increased cash injections. But recovery for the world's second-largest economy is still a little uncertain. Analysts predict China will set around a 5% growth target for next year. Looking forward, UBS analysts anticipate China will set a fiscal deficit target of 3.5%-3.8% of the GDP for 2024.
More recently: In October, China planned to issue 1 trillion yuan (US$140 billion) in bonds and adjusted its 2023 budget deficit target from 3% to 3.8% of GDP to address economic concerns. But Moody's, a respected rating agency, issued a warning for China's credit rating last week. The agency worried about the nation's financial strain from rescuing debt-laden local governments and dealing with the ongoing property crisis. While it's not an official downgrade, Moody's warning suggests these financial stressors will weigh on the country's growth outlook for next year.
The development: Last Friday, China's top decision-makers, the Politburo, shared how they plan to strengthen the economy in 2024. Led by President Xi Jinping, they talked about staying proactive with the nation's economic approach and applying monetary policies that are "flexible, moderate, precise and effective." The focus is on consistent policies to keep the economy healthy, manage risks and boost public expectations. Big goals for next year include increasing domestic demand, promoting positive cycles of consumption and investment and pushing for high-quality development. President Xi, in talks with non-Communist Party representatives, highlighted the crucial stage of China's economic recovery. This Politburo meeting often sets the stage for the mid-December Central Economic Work Conference.
"Efforts should be made to expand domestic demand and form a virtuous cycle of mutually promoting consumption and investment. We need to deepen reforms in key areas and continuously inject strong impetus into high-quality development," said the Politburo, as reported by state media Xinhua.
"For now the markets are more concerned with the property crisis and weak growth, rather than the immediate sovereign debt risk," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
"I'm confident that China will enjoy healthy and sustainable growth in 2024 and beyond," said China's central bank governor, Pan Gongsheng, to the HKMA-BIS High-Level Conference in Hong Kong last month.