China: Targets for 2020

Published on December 16, 2019

The 2019 Central Economic Work Conference (CEWC), attended by members of the Communist Party of China Central Committee and including all ministers and provincial leaders, was held at the Jingxi Hotel in Beijing last week to review the country’s 2019 economic performance and to formally set targets for 2020.

President Xi Jinping and Premier Li Keqiang addressed China’s leadership cadre, but did not directly touch on the Sino-US trade war as a topic, except to note that trade tensions with the US will become a new normal due to Washington’s “lack of sincerity” and, perhaps more to the point, due to Washington’s intention, in Beijing’s eyes, of curbing the rise of China as a rival power. Only by managing its own economic affairs well, it was noted, would China minimize the impact of an ongoing trade war with the United States.

As to the targets for 2020:

** As we flagged before the official CEWC endorsement, the overall GDP target has been nudged down from 6.0-6.5% to “around 6.0%,” while the CPI target was kept to around 3.0%, the same as last year’s (see SGH 12/9/19, “China: Politburo Braces for Slowdown”).

** On a more granular level, the target for value-added industrial output was dropped by 50 basis points, from a 5.5-6.0% range in 2019 to 5.0-5.5% in 2020. Similarly, the growth target for retail sales of consumer goods was dropped by a full percentage point, from 9.0% in 2019 to 8.0% in 2020.

** On the national budget side, revenue growth in the general public budgets of both the central and local governments was seen to increase by 3.5% in 2020, lower than the 5.0% growth rate set for 2019. Expenditure growth at both the central and local government levels was, on the other hand, left unchanged from 2019, at 6.5%.

** As in the past three years, the CEWC meeting did not set a formal trade growth target for 2020, but from what we understand the Central Commission for Financial and Economic Affairs (CCFEA), China’s top economic policymaking body, sees foreign trade growing by 3.0-5.0% next year, with exports up by 3.0-5.0%, and imports growing at an expected 6.0-8.0% rate.

** And on the jobs front, for the third time running, the CEWC decided to target the “surveyed urban unemployment rate” in an effort to provide a more comprehensive picture of the employment environment, “ordering” the creation of 11 million new urban jobs and targeting an urban jobless rate of “within” 4.5% for 2020, the same as for 2019.

Monetary Policy in 2020

Separately, on the monetary policy front, sources in Beijing believe that the People’s Bank of China will likely seek to keep monetary and total social financing growth slightly above actual GDP growth next year, potentially providing two to three targeted cuts to the Reserve Requirement Ratio (RRR) of 50 basis points each, and two to three cuts of 10 basis points each to the one-year medium-term lending facility (MLF).

And finally, while officially endorsing the major 2020 economic targets proposed by the CCFEA, these CEWC targets will be subject to formal revision again by the third session of the 13th National People’s Congress in March of 2020 and are all subject to revision based on incoming data between now and then.

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