China’s leadership is emphasizing its commitment to support businesses as economic challenges mount, particularly due to trade tensions with the United States. During the opening session of the National People’s Congress (NPC), Chinese President Xi Jinping reaffirmed the country’s goal of achieving a growth target of “around 5%” for the year. The Chinese central government has increased its budget deficit target to 4% of GDP. This is a welcome and crucial sign of its willingness to employ fiscal policy tools to help prop up the economy.
The Politburo, which provides broad policy directives, has indicated that China has more room to act on fiscal policy than in previous years. It provides a much more targeted approach of economic assistance, particularly for the hardest-hit sectors. The government aims to assist businesses struggling in the current environment through “multiple measures,” including financial support aimed at stabilizing operations and redirecting exports to the domestic market.
State governments and Fortune 500 companies have already started making their moves to position exporters to ride these waves. According to Zong Liang, chief researcher at Bank of China, “It seems Beijing is not in a rush to launch a large stimulus at this stage.” This sentiment suggests a wait-and-see approach as the federal government figures out the economic picture and what this means for these investments.
While major Wall Street banks have recently cut their GDP forecasts for China, analysts believe that the government’s focus on targeted measures could provide stability.
“While they may not offer many unexpected and groundbreaking surprises, these measures equip policymakers with tools to navigate external uncertainties,” – Bruce Pang, adjunct associate professor at CUHK Business School.
Rather, the Chinese government wants to improve their strategy by doing deep dives on individual companies. This will enable them to better assess the impact of tariffs on multiple sectors. This targeted approach aims to ensure that support is directed where it is most needed, rather than simply implementing broad stimulus measures.
The recent meeting statement from the Politburo had noticeable effects on market indices, including the CSI 300 and Hong Kong’s Hang Seng Index, highlighting investor interest in China’s economic direction. The government’s commitment to supporting businesses should highlight a high-level collaboration among policymakers committed to steering the UK through an increasingly murky and complicated economic landscape.
Chinese Finance Minister Lan Fo’an will be key to executing on these policies. The government’s focus is on promoting inclusive growth while maintaining a path of sustainable fiscal consolidation. The focus remains on achieving the growth target set in March while ensuring that necessary support reaches businesses facing difficulties.