China Economics_ NPC Preview_ A Mark-to-Market NPC

Summary of the National People's Congress (NPC) Preview Industry Overview - Industry: Chinese Economy - Event: National People's Congress (NPC) scheduled to start on March 5, 2025 Key Points and Arguments Economic Growth Targets - Policymakers are expected to maintain a GDP growth target of "around 5%" for 2025, consistent with the 2024 target and actual performance [4][6][9] - Provincial targets for growth are generally set at "around 5%" or higher, with only Qinghai targeting around 4.5% [9][10] - The weighted average of provincial growth targets has slightly decreased from 5.4% to 5.3% [13] Employment Focus - The government aims to keep new urban employment targets above 12 million and maintain a surveyed unemployment rate around 5.5% [16][18] - None of the provinces with numeric job targets reduced their targets for 2025, indicating a strong focus on employment stability despite growth uncertainties [16][20] Inflation Expectations - The CPI target is expected to be set at "around 2%", marking the first downward revision since 2021 and the lowest target since 2003 [25][26] - This reflects a recognition of low inflation realities, with inflation not hitting targets since 2012 [25][29] Fiscal Policy and Revenue Growth - A fiscal expansion of RMB 2.5 trillion (~1.8% of GDP) is anticipated, with the overall government deficit projected to rise to approximately 4% of GDP [5][39][42] - Provinces have set muted expectations for fiscal revenue growth, with only two provinces targeting revenue growth above 5% [31][33] Tariff Impacts - A phased increase of 15% in tariffs on Chinese goods is expected, which could negatively impact exports by 6 percentage points and GDP growth by 0.9 percentage points [5][18] - Approximately 42 million urban jobs could be at risk due to these tariffs [18] Investment vs. Consumption - Local governments are focusing more on boosting investment rather than consumption, with no significant breakthroughs in consumer stimulus reported [32][34] - Provinces are looking to complete RMB 1 trillion in annual investments in key projects [34] Monetary Policy - Anticipated monetary policy adjustments include 50 basis points rate cuts and 100 basis points RRR cuts starting from Q2 2025 [5][39] Conclusion - The NPC is expected to reflect a mark-to-market approach, acknowledging current economic realities without making drastic new decisions [3][4][37] - Policymakers are likely to prioritize employment stability while managing growth expectations amid external pressures such as tariffs [5][16][39]