Key Highlights:
- Target: China's GDP growth target for 2024 is set at around 5%, surpassing the 4%-4.8% projections made by international institutions.
- Policy Orientation: Raising prices, and boosting confidence (consumer confidence and investor confidence in China). By synergizing loose monetary policies with industrial policies that aimed at promoting equipment renewals, a combined effect will be generated. It will drive price levels, particularly the Producer Price Index (PPI), to achieve positive year-on-year growth and return to normal levels. These changes will consequently stimulate consumption and investment.
- Investment: Vigorously promote industrial upgrading, with a primary focus on investing in manufacturing and transportation infrastructure sectors.
- Consumption: Replacement of outdated production and service equipment, automobiles, and home appliances, etc., with the market size for equipment renewal alone exceeding 5 trillion yuan. Financial support for these initiatives will primarily come from the central government.
- Capital: As local governments still need to work on debt resolution and ensure timely delivery of housing projects, the scale of central government investment will increase in 2024. Meanwhile, the government aims to stimulate more investment from private and foreign sectors.
Source: Government Work Report (2024), NDRC's Planning Report (2024)
Target: GDP growth of around 5%, focusing on advancing price increases and industrial upgrading
China sets its GDP growth target for 2024 at around 5%. The accomplishment of this objective will be underpinned as 30 Chinese provinces, cities and municipalities have set their GDP growth targets at 5% or above. The country will vigorously advance price increases and industrial upgrading, provided that it does not trigger systemic risks. Meanwhile, it will make great efforts to boost consumer confidence and investor confidence in China.
Under circumstances of deflation, policy measures are unlikely to drive up consumption within a short period of time, whereas investments tend to respond more promptly. The transitioning from deflation towards economy recovery begins with price increases. In 2024, influenced by the central bank's policies aimed at enhancing the efficient use of funds and limiting financial resources supply for sectors with surplus capacity, some producing enterprises will cut production capacity voluntarily due to contracted profits. The reductions in capacity and inventory may lead to periodic increases in industrial raw material prices. If these price increases are sustainable, they are expected to usher the economy into a positive cycle.
Investment: Manufacturing and transportation infrastructure sectors are key target fields
China will vigorously promote industrial upgrading in 2024, with a primary focus on investing in manufacturing and transportation infrastructure sectors. In the manufacturing sector, priority is given to technological upgrading, supply chain integration and advancement, and the application of scientific and technological advances. While encouraging the rapid development of new energy sources like hydrogen, wind power, and solar photovoltaics, China continues to emphasize increasing oil and gas reserves and output. In terms of transportation infrastructure, it emphasizes on shifting in freight transport from highways to railways and waterways, developing multimodal transportation system, and accelerating digital construction.
Consumption: Equipment renewals alone to create an enormous market worth over 5 trillion yuan
While boosting technological advancement, the central government has introduced policy to promote the replacement of outdated production and service equipment, automobiles, and home appliances, among others. The State Council's recent action plan indicates that the central government will predominantly provide financial backing for these initiatives. However, detailed guidelines for allocating these subsidies still await further development from the government. Preliminary estimates show that the market size for equipment renewals alone exceeds 5 trillion yuan, with focus on seven sectors covering industry, agriculture, construction, education, transportation, cultural and tourism, and healthcare.
Capital: Attract investment from private and foreign sectors
As local governments still need to work on debt resolution and ensure timely delivery of housing projects, the central government will beef up investment in 2024. Official data show that more than half of the local governments have lowered their targets for investment, and their weighted average target for fixed asset investment growth rate is 5.9% in 2024, a decrease of 2.1 percentage points from 2023. China will earmark 700 billion yuan in central government budget for investment this year, an increase of 20 billion yuan over 2023. Meanwhile, the country will issue 3.9 trillion yuan of special-purpose bonds for local government in 2024, an increase of 100 billion yuan from last year.
The Chinese government aims to stimulate more private and foreign investment in China. To achieve this goal, it encourages and attracts more private capital into major national projects and projects aimed at addressing areas of weakness. Furthermore, the government relaxes or remove market access restrictions to attract more foreign investment, with focus on telecommunications and medical services that have substantial market size. However, details of these policies and implementation plans remain to be announced.
The original text of the "2024 Government Work Report" can be accessed via the following link:
https://www.gov.cn/yaowen/liebiao/202403/content_6939153.htm
To get detailed full text, send an email to glconsulting@mysteel.com
Edited by Navy Liu: liuchuanjun@mysteel.com