China says fiscal coverage have to be ‘reasonably strengthened’

Chinese President Xi Jinping chairs a symposium on advancing the integrated development of the Yangtze River Delta and delivers an important speech in east China’s Shanghai, Nov. 30, 2023.

Xinhua News Agency | Xinhua News Agency | Getty Images

China’s top decision-making body of the ruling Communist Party on Friday said the country’s fiscal policy “must be moderately strengthened” to stimulate economic recovery, according to state-run news outlet Xinhua.

China’s Politburo said it would continue to implement “proactive” fiscal policies and “prudent” monetary policies next year, in a bid to bolster domestic demand.

Chaired by Chinese President Xi Jinping, the Politburo’s Friday meeting analyzed the economic work to be undertaken in 2024. It pledged to effectively enhance “economic vitality,” to prevent and defuse risks and to consolidate and enhance the upward trend of an ailing recovery in the world’s second-largest economy.

China’s Politburo said that “proactive fiscal policy must be moderately strengthened, improve quality and efficiency, and the prudent monetary policy must be flexible, appropriate, precise and effective.”

Lost momentum

Demand for Chinese goods has fallen this year as global growth slows, stoking concerns about Beijing’s ability to mount a robust post-pandemic recovery. Momentum has taken a hit from a slew of factors, including the country’s beleaguered property market, sluggish global growth and geopolitical tensions.

HSBC’s chief Asia economist, Frederic Neumann, told CNBC on Thursday that the Chinese economy is unlikely to be bolstered by further fiscal stimulus and still has a “steep hill to climb,” even after a surprise pickup in exports.

Exports in U.S. dollar terms rose by 0.5% year on year in November, defying expectations for a 1.1% decline among analysts polled by Reuters. Imports in U.S. dollar terms fell by 0.6% over the 12 months, well below a consensus forecast of a 3.3% increase.

Economists have noted external demand in China is still relatively weak and warned that policy support that focuses purely on the supply side will likely not be enough to achieve lasting results.

— CNBC’s Elliot Smith contributed to this report.

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