No big surprises from the Two Sessions
Special points to highlight in this issue:
* We are halfway through the “two sessions” meetings of the NPC and CPPCC with many of the major speeches on the budget, economic policies, and economic prospects delivered. China will target GDP growth this year of 5 percent, although Chinese provincial targets are, in the aggregate, a lot higher.
* If consumption growth is strong, as I expect it to be, China should be able to achieve a GDP growth rate of closer to 6 percent than 5 percent. More importantly, much of this growth will be driven by consumption and business investment, which comprises the “high quality” component of Chinese growth. That means, among other things, growth can be accomplished with a minimal increase in China’s debt-to-GDP ratio.
* The initial trade numbers for January and February, however, were not very promising. Exports were down 6.8 percent, less than expected, while imports were down a whopping 10.2 percent, far more than expected. The result is the largest January-February trade surplus in Chinese history.
* For all the talk of boosting consumption (which has become de rigueur in all economic policy speeches), Beijing and (especially) local governments still find it much easier to respond to economic worries with supply-side policies than with demand-side policies, even when the problem is clearly on the demand side. As a result, I expect China's manufacturing to become even more globally competitive in 2023.
Now read on...
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