Thu Sep 19 05:53:57 UTC 2024: ## China Expected to Boost Stimulus Measures to Meet 2024 Growth Target

**BEIJING** – China’s policymakers are expected to intensify efforts to support the economy, particularly by stimulating demand, as the country faces a challenging 2024 growth target and persistent deflationary pressures.

While China’s economy slowed in August, officials remain committed to achieving the roughly 5% GDP growth goal for the year. This commitment is evidenced by President Xi Jinping’s recent call for authorities to strive towards meeting the target.

Analysts and policy advisers suggest that a combination of fiscal and monetary policies will be implemented. This could include:

* **Increased Fiscal Spending:** Local governments are already accelerating bond issuance to finance major infrastructure projects. The central government is also increasing debt issuance to support key strategic sectors.
* **Further Monetary Easing:** The People’s Bank of China (PBOC) is expected to lower interest rates and reduce banks’ reserve requirement ratio, taking advantage of the U.S. Federal Reserve’s recent interest rate cut.
* **Mortgage Rate Cuts:** The PBOC may also lower interest rates on existing mortgages to provide relief for homeowners.

However, a key Communist Party meeting in July emphasized a focus on the supply side of the economy, suggesting that forceful measures to address weak consumer demand and deflation risks are unlikely in the near term.

While China has traditionally relied on infrastructure spending to drive growth, this approach has contributed to increasing debt risks and fueled deflationary pressures. Prices have fallen, forcing companies to cut costs, leading to lower wages and job losses.

The situation is further complicated by the ongoing deflationary trend, with the GDP deflator – a broad measure of inflation – remaining negative for five consecutive quarters, the longest deflationary streak since 1999.

Experts believe that a more targeted approach is needed, emphasizing demand-side stimulus. This could involve government spending on social security programs like healthcare, education, and public housing, which would help boost consumption.

Despite the projected increase in stimulus measures, experts like ANZ’s Xing Zhaopeng remain cautious. While they expect a shift from supply-side focus to demand-side policies, they are not anticipating a significant surge in spending.

The effectiveness of the proposed stimulus package remains to be seen, as experts warn that a lot more needs to be done, particularly on the fiscal side, to address local government debt pressures and effectively combat deflation.

Read More