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China premier Li Keqiang: China’s 2021 GDP growth target of over 6% is not low

  
Analysis, Economy

Remarks by China premier, Li Keqiang, after the NPC meeting

  • China is obviously optimistic about economy, but also realistic
  • China doesn’t want big fluctuations in GDP growth
  • 2021 GDP growth target should match that in the next year to avoid big swings
  • Growth target is aimed to guide expectations
Historically speaking, it is low but one also has to consider the current predicament of the global economy I guess. Nonetheless, when China sets the target as such, expect that to be hit one way or another regardless of how the economic figures turn out to be.
China

More on China’s yearly GDP targets … clearing the confusion?

  
Analysis, Economy

Chinese media (Caixin) with a piece saying that despite the government not proposing to set targets for 2021 through 2025, targets have not been wholly scrapped.

Referring to remarks from Hu Zucai, deputy head of the National Development and Reform Commission.
HU says a numerical target for GDP growth has been abandoned. On the other hand, Premier Li Keqiang told the annual meeting of the National People’s Congress on Friday that the government is proposing a GDP growth target of “above 6%” for 2021. Which sounds like a target to me?
Anyway, back to Hu:
  • There are other quantified targets — indicators like unemployment and carbon emissions that carry implications for the overall economic growth rate. The aim is to keep average annual growth in a “reasonable range” and to set a goal each year that is appropriate for the country’s economic situation at the time, he said, citing the draft outline of the plan.
  • Policymakers are aiming to keep the increase in annual GDP in line with the economy’s potential growth rate, Hu said
Here is the link for more (may be gated). See if you can make sense of it.
Chinese media (Caixin) with a piece saying that despite the government not proposing to set targets for 2021 through 2025, targets have not been wholly scrapped.

OECD raises 2021 global GDP growth forecast to 5.6% from 4.2% previously

  
Analysis, Economy

OECD presents their latest economic forecasts, outlook

OECD
  • 2021 global GDP forecast +5.6% (previously +4.2%)
  • 2021 US GDP forecast +6.5% (previously +3.2%)
  • 2021 Eurozone GDP forecast +3.9% (previously +3.6%)
  • 2021 UK GDP forecast +5.1% (previously +4.2%)
The organisation also raises its 2022 global GDP growth forecast to 4.0% from 3.7% previously in December. The latest outlook projects a significant boost to the US and global economy, helped by Biden’s $1.9 trillion stimulus package.
The report highlights that Europe risks falling behind in the global upswing with expectation for global output to rebound above pre-pandemic levels by mid-2021.

Eurozone Q4 final GDP -0.7% vs -0.6% q/q second estimate

  
Analysis, Economy

Latest data released by Eurostast – 9 March 2021

  • Q4 GDP -4.9% vs -5.0% y/y second estimate
The second estimate report can be found here. Looking at the details, household consumption fell by 3% q/q after the revised 14.1% q/q jump in Q3 while government expenditure expanded by another 0.4% q/q after the revised 4.6% q/q jump in Q3 last year.
The data doesn’t really do much but reaffirm a potential double-dip recession in the Eurozone as Q1 economic conditions may also present a contraction.
That said, the focus of the market remains more geared towards the 2H 2021 outlook.

Fitch expects a more modest fiscal consolidation in China this year

  
Analysis, Economy

Analysts at Fitch rating agency say the Chinese government planned fiscal consolidation in 2021 is more modest than the agency previously expected.

Also:

 

  • China strikes cautious note on fiscal consolidation
  • estimate consolidated fiscal deficit will moderate to 7.5% of GDP this year, from 9% in 2020
  • baseline forecasts suggest Chinese government debt-to-gdp ratio will rise to about 57% by end-2021, up by 10pp from end-2019

 

(The implication of all this is even more stimulus is ahead in China than previously thought)

PIMCO says developed economies may require stimulus for longer than currently appreciated because of China winding back stimulus

  
Analysis, Economy

Pacific Investment Management Company (PIMCO) is a US firm that manages circa US$1.9 trillion in assets.

The firm have a publicly available piece posted in which they argue:
  • The  People’s Bank of China have announced it has begun to reduce coronavirus-related stimulus early
  • policy tightening in China is already being felt domestically in the form of tighter money market liquidity, moderating private credit growth, and reduced government bond issuance
  • PBOC is targeting overall credit to grow in line with nominal GDP, implying the credit impulse will fall to around -3.5% of GDP by year-end, from a peak above 9% in the fourth quarter of 2020. All else equal, this may slow China’s economic activity to below-trend levels by late 2022.
One of the key implications PIMCO cites is:
  • China provides a key engine of global growth … If past is prologue, developed countries may be required to maintain stimulus measures for longer than presently expected.
Here is the link if you want to read quite a bit more.
Pacific Investment Management Company (PIMCO) is a US firm that manages circa US$1.9 trillion in assets.

More from BOJ’s Kuroda – Bank likely to debate a ‘band’ for its 10-year JGB target

  
Analysis, Economy

The Bank of Japan Governor Kuroda is currently reviewing its policy and due to present on this at its March meeting announcement (March 19)

Bank of Japan Governor Kuroda sounding coy:

 

  •  says BOJ’s negative rate policy was able to push down yield curve, help prop up economy and output gap via lower real rates
  • says BOJ will likely debate whether to expand implicit band for its 10-yr JGB target, but more discussions needed before final decision
  • says whether to expand BOJ’s 10-yr JGB yield band is a difficult issue
  • BOJ sees need to enhance market functions but must also keep yields stably low as the pandemic impact on economy continues
  • BOJ must scrutinise the merits and costs of ETF buying
  • specifics on how the make the BOJ’s ETF buying more flexible, nimble will be discussed at the March review
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