In the upcoming National People’s Congress meeting (NPC), starting March 5, we expect the government to reiterate the priority of supporting growth and call for more policy support. In our current baseline GDP forecast of 4.9%, we expect the meeting to set the GDP growth target at “around 5%” with supportive macro policies, including a slightly higher headline fiscal deficit at 3% of GDP, a small increase of new special local government bond quota to 3.7 trillion yuan ($537 billion) to 3.8 trillion yuan and more property policy easing.
We assume one more required reserve ratio (RRR) cut, no policy rate cut but a small loan prime rate (LPR) cut, and a modest rebound in credit growth to 10% in 2023. We see more measures boosting consumption but no nationwide major consumption stimulus or income subsidies. Restoring confidence, innovation, and self-reliance in supply chain will be the key policy focus.
