US economic data, AI and Donald Trump are dominating the market’s attention at the moment but the real signal for the global economy this week is likely to come out of Beijing, where the National People’s Congress is taking place all week.
Since late last year the market has been circling this event as the potential catalyst for a turn in the Chinese economy. That’s included some major buying of Chinese stock markets.
I think some of what’s happened doesn’t depend on the government as there appears to be an improving mood in China this year, in part because of DeepSeek. That comes after 5 sluggish years following the onset of covid.
In any case, some help with the economy would certainly be welcome and is already priced in. HSBC is optimistic as they say “Beijing to adopt ‘break-the-mold’ domestic policies to counter external headwinds with consumption a key focus.”
What’s actually expected? There are some hints here:
- Officials will set a growth goal of around 5%
- A large deficit target of 4% from 3% — around 12 trillion yuan
- A2 trillion-yuan quota for new special sovereign bonds
- Up to 4 trillion yuan worth of new special local government bonds
There are other calls for the central government should take on at least 20 trillion yuan ($2.8 trillion) worth of local sovereign debt, in a debt-for-assets swap. Another is expanding consumer stimulus to 800 billion yuan to 1 trillion yuan from last year’s 300 billion yuan.
Meanwhile, some are warning that we shouldn’t expect too much on boosting consumption this week and that it will be slowly rolled out over the course of the year, in part so policies can be measured to counteract US tariffs.
The document to watch for is the Government Work Report, which is expected late Tuesday but it may be vague, not specific and I believe that would result in disappointment.
