SocGen's View on China's NPC

The French bank is in line with the consensus in terms of the growth target, but sees the fiscal deficit potentially surprising to help achieve this. See below for more details.

• SocGen: "We – in line with the consensus – expect the growth target to be set at “around 5%” again. This would be ambitious, and probably intended to shore up confidence. The fiscal budget, also to be revealed at the NPC, will probably be more expansionary than last year. We see some chance of upward surprises to our baseline forecast of 3% of GDP on-budget fiscal deficit, which would mean 1-1.5% pp-of-GDP expansion in the broad fiscal stance. The accelerating pattern of incremental easing since 4Q23 suggests that policymakers might well continue to ramp up the support throughout the year, if needed. In particular, the two main channels that have recently been activated and warrant close monitoring are the PBoC’s pledged supplementary lending (PSL) and the funding support provided to developers under the project whitelist.
• There are two main developments that we think China needs earnestly to counter the
  increasingly entrenched deflationary pressure: (1) more sizeable support to household
  income and consumption and (2) a more hands-on push towards speeding up the
  restructuring of developer debt. On the former, we have finally got signs of some more material progresses to come soon. The latest speech by the President pointed to a higher chance of central-government subsidies to white goods consumption. However, the housing sector priority looks very much limited to affordable housing and project completion."