Nomura: GDP Target Too High

Nomura believe that “the GDP growth target is too high to realistically achieve, while the fiscal support measures appear somewhat timid.”

• “Despite a transfer of fiscal stabilisation funds worth CNY2.3tn and a promise to increase fiscal spending by CNY2.0tn to speed up fiscal spending growth, a sharp decline in land sales revenue this year could result in close to zero growth in total government spending.”
• “Beijing plans to cut and refund taxes worth a total of CNY2.5tn this year, but it is quite difficult to accurately estimate its economic impact. In our view, a fiscal revenue growth target of 3.8% is quite ambitious in light of the ongoing growth slowdown, especially considering fiscal revenue growth was -8.1% Y/Y in Q4 2021.”
• “Even with the planned 18% increase (CNY1.5tn) in transfer from the central government to local governments, we expect many local governments in lower-tier cities to face severe financial difficulties due to slumping revenues from property sector-related taxes and land sales.”