MNI China Press Digest Jan 4:  Fiscal Gap, GDP, Yuan Strength

Highlights from Chinese press reports on Wednesday:

• The government will maintain the appropriate level of expenditure to improve people's livelihood in 2023, despite the fiscal gap remaining "prominent", according to Finance Minister Liu Kun. China will appropriately expand the scope of special bonds to drive investment, and to promote the overall operation of the economy. The Finance Ministry will focus on standardising the management of local government financing platforms, and will improve the use of preferential tax and subsidy policies to both private and state firms. Liu’s comments were reported in an interview with Chinese state media outlet Xinhua.
• Several tier two cities in China are targeting GDP growth rates of between 5.5% to 7% in 2023, as local authorities remain optimistic about the economic recovery, according to the 21st Century Herald. Citing experts, the paper said the optimisation of epidemic controls, together with more growth oriented policies and lower base effects from 2022 will have a significant positive impact on economic recovery. Jinan, Changsha, Qingdao and Hefei are targeting growth in fixed asset investment of between 6% and 10%, and growth in total retail sales of between 5% and 9%. With the slowing of the global economy weighing on exports, the economic recovery will be driven by investment and consumption in 2023, the paper said.
• The yuan’s recent strength can continue as China’s economy and yuan assets become investment safe havens amidst a global slowdown in 2023, according to the Securities Daily. The yuan recently reclaimed the 6.9 mark against the dollar as end-of-year liquidity requirements, an extension of trading hours, increased weighting in the International Monetary Fund's Special Drawing Rights, and Covid optimisation measures increased market support for the yuan. The impact of the strong U.S. dollar on the yuan will weaken in 2023, and China's economic recovery amid a global downturn will boost demand for yuan assets and capital inflows.