UOB Group Head of Research Suan Teck Kin, CFA, and Economist Ho Woei Chen, CFA, assess the recent NPC event.

Key quotes

“The National People’s Congress (NPC) of China resumes setting growth targets for 2021 with the target for this year at ‘over 6%.’ That’s considerably lower than consensus forecast and we see the GDP target more as an indication of the sustainable growth China is aiming for than it expects for this year. “

“Overall, other economic goals, including urban job creation, inflation, M2 and total social finance growth, are similar to 2019 (before COVID), suggesting the expected normalization of the economy. This year. Nevertheless, the budget deficit and local government bond issuance targets have been set above market expectations, suggesting that substantial resources are still available to cushion the downside risks to growth. “

“China’s economic policies will be focused on expanding domestic demand, strengthening science and technology and a high level of openness where consumption growth, innovation and modernization of the industrial system will play an important role. “

“China will pursue a cautious approach Monetary Policy position, in a flexible, targeted and appropriate manner. The growth targets for M2 money supply and total social finance this year are expected to be in line with nominal GDP growth after rising sharply last year to support economic recovery. While loan growth is expected to moderate this year, we continue to expect the benchmark 1-year Prime Lending Rate (LPR) to remain unchanged at 3.85% for the remainder of 2021. “