As US elects its new president, China’s top legislature will meet for potential fiscal measures

China will convene a highly anticipated legislature meeting - expected to serve as a window into fiscal stimulus plans - early next month as top authorities take the outcome of the 2024 US presidential election into account amid their economic-revival efforts. The November 4-8 meeting of the NPC Standing Committee will take place later than had been expected. The national legislature often meets in the second half of October to discuss a wide range of issues facing the world’s second-largest economy. The dates were announced at a Friday meeting chaired by Zhao Leji, chairman of the Standing Committee of the National People’s Congress. Its agenda includes a discussion on the country’s financial work, state asset management and a review of some law revisions. The market has been expecting a change to the bond-issuance quota or deficit ratio at the legislative meeting. However, no bills related to the financial ministry nor budget plans have been mentioned in the official statement. Analysts say Chinese policymakers may be planning to mitigate any potential impact of geopolitical surprises. Lawmakers are likely to come together with the market eagerly awaiting new information about the latest developments in China’s economic stimulus plans, and the meeting could serve as an opportunity for a fresh announcement. Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis, said the omission of budget plans from the agenda might be because China’s top leaders “don’t want to tie their hands”. A new US president will be elected on November 5, and a new China policy - such as high tariffs on Chinese goods, as flagged by Republican candidate Donald Trump - could pose a fresh test to China’s trade, tech and economy. “I don’t think they want to look as if they are reacting twice just because of the US. That would give the world the impression that China depends too much on the US. I think this is why they are dragging their feet,” Garcia-Herrero said. The economist added that China “will need a much bigger stimulus” if the former US president retakes the White House and follows through on his campaign vows. China first fired off a policy bazooka on September 24, when the People’s Bank of China announced a larger-than-expected monetary-easing package, including a cut of 0.2 percentage points to the seven-day policy rate, a cut of 0.5 percentage points to the reserve requirement ratio, a slashing of the mortgage rate, and two tools to help stabilise the stock market. It ignited market enthusiasm with a rally in the domestic A-share market while fuelling hope that a massive stimulus, comparable to the 4-trillion-yuan package unleashed in 2008, was on the way. Other government agencies continued to roll out stimulus measures, including two “100-billion-yuan” lists of construction projects by the National Development and Reform Commission, a one-off large-size local debt swap pledged by the Ministry of Finance, as well as the housing ministry’s plan to reconstruct 1 million housing units, plus the doubling of bank credit to whitelist property projects by year’s end. Although the market has been disappointed at the omission of a headline stimulus figure, the attention has turned to the upcoming NPC Standing Committee session, which has the power to adjust budget plans and approve government bond issuances. Even though China has rarely revised its fiscal target, expectations are high that Beijing will lift its 2024 budget deficit target from 3 per cent of its gross domestic product with additional debt issuance by the central government - a move it made in 2023. Finance minister Lan Foan said on October 12 that the central government had room to increase debt and the deficit, but noted that such policies were still under discussion. The measures announced at the end of last month by the PBOC ... are not sufficient to lift growth in a substantially material way Pierre‑Olivier Gourinchas, IMF The nation’s legislature is also expected to make approvals that allow local governments to front-load part of their 2025 bond quota for public expenditures. Concerns are mounting for many of China’s local governments over their finances, as the nation’s prolonged property crisis has hurt land sales. Local governments across the country are at the forefront of its economic development, but heavy and often unchecked borrowing over the past couple of decades has resulted in many of the regions being saddled with mountains of debt. China’s gross domestic product grew 4.6 per cent in the third quarter, the slowest expansion in more than one year. Economic growth rose 4.8 per cent in the January-September period – below the annual growth target of around 5 per cent. More importantly, there are still no sufficient signs that the crisis-hit property market has reached a bottom. January-September property investment dropped 10.1 per cent, slightly narrowed from a fall of 10.2 per cent a month earlier, government data showed. While awaiting details of China’s total fiscal stimulus, the International Monetary Fund on Tuesday warned of further declines in confidence among households and companies alongside lingering property market issues. “The measures announced at the end of last month by the PBOC, although they go in the right direction, are not sufficient to lift growth in a substantially material way,” said Pierre‑Olivier Gourinchas, a director of the IMF’s research department, at a media briefing in Washington.