China sets for weak showing as growth target disappoints

BLOOMBERG

Chinese markets may come under pressure again on concerns that authorities will withhold stimulus after unveiling a conservative economic growth target that is below many investors’ expectations.
The consensus-lagging growth goal of around 5% for 2023, as Premier Li Keqiang outlined in a key address to open the National People’s Congress, suggests strong monetary or fiscal help may be off the table for now. His last government work report at the annual parliamentary meetings also dampened hopes for more potent measures to ease an unprecedented property crisis.
“Frankly this number was not even in our possible scenarios,” said Li Weiqing, a fund manager at JH Investment Management Co, referring to the growth target.  “I think this means that any anticipation for massive stimulus, either for real estate or for investment, is going to be seen as falsified, at least in the near term.”
The absence of more aggressive steps to boost growth threatens to weaken the momentum of a nascent rebound in Chinese shares last week following the release of robust manufacturing data. What may reshape market dynamics in the coming days will be potential sweeping changes to China’s bureaucracy and the lineup of a new cabinet under Li Qiang, widely expected to be the next premier, as the political gathering continues.  Premier Li’s work report mostly repeated familiar official rhetoric from prudent monetary policy to maintaining a stable currency.
The budget also suggests fiscal support will be restrained, with a mild deficit target increase and a special bond quota that heralds slower investments by local governments. Rather than offering fresh remarks that may further ease concerns about Beijing’s stance on the country’s technology behemoths, Li stressed an industry policy built on self-reliance, underscoring a determination to secure breakthroughs in areas such as semiconductors amid escalating tensions with the US.
On property, Li said China will target disorderly expansion in the sector, pledging to help defuse and prevent risk in high-quality, major developers. He reiterated the policy line that “Housing is for living in, not for speculation” that is synonymous with Beijing’s crackdown on builders’ excessive debt in recent years.
The latest gains in Chinese stocks came after a reopening-driven rally lost steam earlier last month. The benchmark CSI 300 index rose 1.7% last week, with the offshore yuan also up 1.2% against the dollar. To be sure, some observers think Beijing has reasons to refrain from pursuing a more expansionary policy for now.

China to boost grain capacity under new food security push
China will push to increase grain production capacity by  50 million tons under the nation’s drive to bolster food security and meet rising demand. Keeping grain output above 650 million tons is crucial to  ensure adequate supply and maintain stable prices, the National Development and Reform Commission said in a report to the annual parliamentary gathering in Beijing.
“We should keep total grain acreage at a stable level, promote the production of oilseed crops, and launch a new drive to increase grain production capacity,” Premier Li Keqiang said in his final government work report to the National People’s Congress. That will include development of high quality farming land, support for the agricultural technology sector and more innovation in the seed industry, according to Li.