Early policy key to strong performance

Top planning body ensures solid start for 2024 economy with effective moves

China's top economic regulator vowed on Thursday to front-load policy support early next year to achieve a solid start for the Chinese economy in 2024, as mixed economic indicators for October necessitated more stimulus to sustain recovery momentum.

Stepped-up fiscal expansion will likely bolster economic growth in the first half of 2024, experts said, as earlier government bond issuances and a deficit-to-GDP ratio that may exceed 3 percent help boost infrastructure investment.

Accommodative monetary steps can also be expected, they said, including targeted low-cost funding for public housing and local government debt risk resolution, in addition to potential cuts in interest rates and the reserve requirement ratio — the proportion of cash lenders must keep in their vaults as reserves.

Li Chao, deputy director of the Office of Policy Studies at the National Development and Reform Commission, said the commission will make full preparations to front-load macroeconomic policy support early next year, pledging to ensure a solid start for the Chinese economy in 2024.

Li said the commission will expedite efforts to prepare investment projects funded by the 1 trillion yuan ($138 billion) in special treasury bonds.

She added at a news conference on Thursday that the integration of eldercare, childcare and other service facilities in urban communities will be encouraged to expand domestic demand for such services consumption.

Li's remarks regarding front-loading stimulus measures came after mixed indicators for October indicated that the economy is continuing to recover, but structural difficulties remain.

The National Bureau of Statistics said services, retail sales and industrial production sped up year-on-year in October, but fixed-asset investment decelerated amid protracted property sector weakness, with more large and medium-sized cities reporting dips in home prices over September.

Given such pressures as property sector sluggishness and relatively weak consumer and business sentiment, Chinese policymakers are likely to materially step up easing in the coming months and underpin full-year economic growth of 4.8 percent in 2024, said Shan Hui, Goldman Sachs' chief China economist in a report.

Looking ahead to 2024, Xiong Yuan, chief economist at Guosheng Securities, said the deficit-to-GDP ratio may exceed 3 percent and newly added local government special bonds — a key funding source for infrastructure investment — may be issued at an early date and amount to 3.8 to 4 trillion yuan, with public housing one of the spending focuses.

On the monetary front, Zhang Ming, deputy director of the Institute of Finance & Banking at the Chinese Academy of Social Sciences, said special purpose vehicle, a monetary policy tool, may be launched to provide local government financing vehicles facing default risks with short-term, secured loans while they look for longer-term financing, helping them sail through liquidity stress.

Officials also announced more measures to attract foreign investment on Thursday, after foreign direct investment in the Chinese mainland between January and September dropped 8.4 percent year-on-year — partly due to a high comparison base — to 919.97 billion yuan.

Li said the NDRC will work to launch the seventh batch of major foreign investment projects, which are large in scale and technologically advanced, as soon as possible while facilitating pragmatic cooperation between domestic and foreign-invested enterprises.

He Yadong, a spokesman for the Ministry of Commerce, said on Thursday the ministry is investigating any possible discriminatory regulations and measures against foreign-funded companies to create a more equitable environment for competition.

Zhu Wenqian and Ouyang Shijia contributed to this story.