Nomura On China NPC

Nomura note... "The National People’s Congress (NPC), China’s national legislature, started its annual parliamentary gathering today with outgoing Premier Li Keqiang delivering his last government work report. This year, Beijing opted for a fairly conservative GDP growth target of “around 5.0%”, lower than the target set for 2022 and our expectation for this year (both at ~5.5%). Interestingly, market expectations on the GDP growth target were rising in the run-up to the NPC session, so markets may be slightly disappointed in this official “around 5.0%” target. However, the fiscal deficit-to-GDP ratio target has been set at 3.0%, above our forecast and the 2022 target (both at 2.8%). On macroeconomic policy, Premier Li Keqiang’s work report today for the most part maintained the contents and tone of the Central Economic Work Conference (CEWC) in December.

Overall, we view it as a relatively conservative but pragmatic proposal for delivering a healthy and organic economic recovery from last year’s huge disruptions caused by Covid, and we see no sign of a massive stimulus programme. In our view, the GDP growth target of “around 5.0%” is a reasonable and rational choice, as China’s economy is still set to face with multiple headwinds over the course of the year. We continue to expect China’s GDP growth to pick up to 5.3% this year from 3.0% last year, and caution against being overly optimistic regarding the pace of recovery this year."