China: NPC sets the growth target at “above 6%” – UOB

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

Key Quotes

“China’s National People’s Congress (NPC) resumes growth target setting for 2021 with the target for this year at “above 6%”. This is considerably lower than consensus forecast and we see the GDP target more as a sustainable growth indication that China is aiming for than what it is expecting for this year.”

“Broadly, the other economic targets including urban jobs creation, inflation, M2 and total social financing growth are set similar to those in 2019 (pre-COVID), suggesting the expected normalisation of the economy this year. Nonetheless, fiscal deficit and local government bond issuance targets were set higher than market expectation, suggesting that substantial resources are still on hand to cushion downside risks to growth.”

“China’s economic policies will be geared towards expanding domestic demand, strengthening science and technology and a high-standard of opening up where consumption growth, innovation and modernisation of the industrial system will play an important role.”

“China will pursue a prudent monetary policy stance, in a flexible, targeted and appropriate manner. The growth targets of M2 money supply and total social financing this year are set to be in line with the nominal GDP growth after rising sharply last year to support the economic recovery. While loans growth is set to moderate this year, we continue to expect the benchmark 1Y loan prime rate (LPR) to be kept unchanged at 3.85% for the rest of 2021.”