Barclays On China NPC

Barclays note... "Expectations were high for China's week-long annual National People's Congress (5-13 March), on a possibly higher-than-expected growth target as well as potential announcements related to consumption and property policies. A third of the 24 economists surveyed by Bloomberg expected a growth target of "around 5.5%" while Reuters report on 2 March noted that China could aim for a target of up to 6% target.

The ~5.0% GDP growth target delivered by the outgoing Premier Li Keqiang in the annual Government Work Report (GWR) on Sunday may therefore have disappointed some, but is consistent with our base case. Key economic targets offered no upside surprises: the growth target, a 3.0% budget deficit, and CNY3.8trn local-government special bond quota.

We think the modest growth target partly reflects a sober assessment by the leadership regarding the challenges facing the economy, in particular, the sustainability of the consumption recovery, continued drag from weak real-estate investment, uncertain external demand, and elevated geopolitical tensions.

Such a conservative growth target would reduce the need for big monetary and fiscal stimulus, while also enabling the new government to potentially "over deliver" in view of the political cycle. We have shown that China's actual GDP growth has modestly overshot the target in the periods following the last two government reshuffles under President Xi in 2012-13 and in 2017-18."