The opening session of the 20th Chinese Communist Party’s Congress at the Great Hall of the People in Beijing in this file photo. — AFP
BEIJING: Chinese lawmakers are gathering in the shadow of the US election to sign off on a financial package that’s set to run into the trillions of yuan yet is unlikely to put the market fully at ease.
The stakes have grown for this week’s conclave of the Standing Committee of the National People’s Congress, the executive body of the nation’s top legislature, as it’s expected to round out China’s largest effort to lift growth since the pandemic.
The session in Beijing that started yesterday and will end on Friday, will probably unlock additional resources meant to take the pressure off local governments and recapitalise major state lenders, according to banks such as Goldman Sachs Group Inc and HSBC Holdings Plc.
But with the US presidential race still tight and Chinese policymakers putting priority on the more immediate challenges facing the US$18 trillion economy, it may be months before detailed plans to support consumption come into focus.
Policy-setting meetings in December or March are the next key dates to watch for clues about measures to prop up consumer spending power, which will be crucial to turning around sentiment.
“They don’t want to come up with a big number and then not be able to get it done,” said Nicholas Yeo, head of China equities at abrdn. “The government is very cautious about spending.”
The lingering suspense over the pacing and targets of financial support will complicate investment decisions for traders.
They are already whipsawed by the volatility stalking Chinese markets since a stimulus blitz in September sought to encourage lending and offered support for the stocks and property markets.
The outcome of the US election could also force Beijing to strengthen efforts to bolster domestic demand, given the threat by Republican nominee Donald Trump to impose hefty tariffs on Chinese goods if elected.
Economists at Goldman Sachs, Macquarie Group and Nomura Holdings Inc predict lawmakers this week will back at least one trillion yuan in quota of special sovereign bond issuance to replenish bank capital.
They also expect approval for an increase in local government bond sales either this week or in the coming months. — Bloomberg
