By Jiahui Huang and Fabiana Negrin Ochoa
China's top leaders gather this week in a closed-door meeting to set the economic agenda for the year ahead. The annual talks come as a wave of rate cuts, housing policy easing and bond issuances have yet to convincingly lift the mood around slowing growth in the world's second-biggest economy, and with a possible trade war with the U.S. looming.
Here's what we're watching.
2025 GROWTH TARGET CLUES: China earlier this year set a target of about 5.0% economic growth for 2024. Next year's aim won't be officially announced until March, but analysts are watching the December meeting for clues on whether officials will set the bar higher or lower.
In a rare glimpse into policymakers' thinking, an editorial by the state-owned People's Daily last week said that economic growth of less than 5.0% is acceptable, and that there is no need to "worship speed."
Any target under 5.0% would be the lowest since 1990. Still, that could give officials room to make longer-term structural reforms that don't necessarily boost growth quickly but help support the rise of economy drivers beyond exports or building, said Harry Murphy Cruise, an economist at Moody's Analytics. ANZ's Zhaopeng Xing added that Beijing likely will want to leave some policy room for what happens under a new Trump administration in the U.S., saying "It's gonna be a four-year battle."
Danske Bank economist Allan von Mehren is still betting on the 5% goal, seeing Beijing as keen to signal to companies and local governments that growth is a high priority.
"Markets will view anything that isn't 5% as disappointing," Cruise said. "They're looking at the here and now."
STIMULUS PLANS: The meeting isn't expected to yield hard numbers on stimulus, but analysts will look for hints on what's in the policy pipeline.
Maybank's Erica Tay forecasts qualitative, rather than quantitative, indications of strong fiscal support, such as measures to strengthen social safety nets and subsidize household purchases. That will pave the way for an increase in the 2025 fiscal deficit, she said.
Officials could also call for more special central and local government bond issuance to expand the trade-in program for consumer goods, support debt swaps and assist with property inventory destocking, said Dr. Zhang Ning, senior China economist at UBS Investment Bank.
China's pivot to more aggressive stimulus in recent months has spurred stock rallies and market hopes, but a lack of details around policy implementation and a dearth of consumption-focused measures continues to fuel doubt that momentum can be sustained. Without a strong follow-up, it'll be hard to hold on to the gains made so far, economists say.
POLICY WISHLIST: Analysts are watching for signs that Beijing will address two persistent drags on the economy: lackluster consumer demand and a property sector slump. Hopes are high after the Politburo hinted at a more forceful approach to boost demand next year, pledging more proactive fiscal policy and moderately loose monetary policy next year. It also vowed to stabilize the housing market, the state-run Xinhua News Agency reported.
A readout at the end of the conference could offer a way to gauge how serious Beijing is about both. If policymakers place the section about demand high in the document, that would indicate more priority, ANZ's Xing said. And any new language on the property crisis could signal appetite for strengthening existing measures that have yet to arrest a decline in house prices.
There needs to be a push to ensure that household spending becomes a larger driver of the economy, Moody's Analytics' Cruise said. Things like improved access to social welfare, better graduate employment and more generous cash handouts would go a long way to helping revive confidence, he said.
Write to Jiahui Huang at jiahui.huang@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
12-09-24 0343ET
