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MNI China Daily Summary: Wednesday, Aug 21
MNI INTERVIEW: China 2020 Growth May Recover to 4%-Counsellor
--China Lawmakers May Set Annual Growth Target
BEIJING (MNI) - China's economy could bounce back from Covid-19 and grow by
4% in 2020 if the outbreak remains under control and the right policies are
pursued, including an expanded fiscal deficit, an advisor to the State Council
told MNI in an exclusive interview.
"I believe the Chinese economy will stabilise and gradually improve," Liu
Huan, a counsellor to the State Council, said on Tuesday. "The most difficult
period has passed; no matter what, the outbreak has been effectively controlled
domestically."
The government's fiscal deficit is likely to rise significantly, possibly
exceeding 3% of gross domestic product or even 4%, Liu said, adding that broader
measures of the deficit, including issuance of special Treasury bonds and local
government special bonds, could total CNY5 trillion. He cautioned, however,
against allowing excessive money supply growth to fuel inflation.
After contracting 6.8% y/y in Q1, China could see flat GDP in Q2, before
growing by 6% y/y in both Q3 and Q4, he said.
--GDP TARGET
In contrast to some advisors, who have indicated the government may do away
with its usual practice of setting a GDP target, Liu said a target could be
announced at this week's set-piece National People's Congress, although he
stressed that that was just his personal view.
"If we can achieve 3% growth, given the epidemic, that would be a
tremendous success," he said.
The government could issue special Treasury bonds to raise funds to boost
infrastructure spending in targeted industries, Liu said. The bonds would also
serve to absorb excess liquidity and provide investable assets for savers. About
CNY1 trillion could be targeted at retail buyers, with a 3%-4% coupon on
10-20-year bonds providing better returns than bank deposits, he said.
Quotas for issuance of local government special bonds, which are paid off
by returns on projects they fund, could also be expanded, Liu said. A total of
CNY2.29 trillion had been approved by the end of May.
While Finance Minister Liu Kun has called for "more proactive fiscal
policies," the fiscal boost will almost certainly need to come from spending, as
the options for reducing tax are limited following CNY2.3 trillion in cuts last
year, Liu said. Tax cuts are only effective when businesses are profitable, so
would be of little benefit in the current environment, he said.
--JOBS CHALLENGE
The government faces mounting pressure to provide jobs, a more challenging
prospect in coming months given the outbreak, Liu said, though he noted that
many baby boomers will exit the workforce in the next few years, creating
vacancies.
In the near term, migrant workers can be employed in the post-Covid
economy, delivering packages or returning to their home regions to work on the
land or start small ventures such as selling local products online, Liu said.
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: MAQDS$,M$A$$$,M$Q$$$,MI$$$$,MT$$$$,MX$$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.