Banking on strong start, China sets sights on latest technology, upgrading factories in 2024

China's senior economic and financial officials have reiterated confidence in achieving the country's development goals for 2024 as a raft of targeted steps will lend steam to the steady recovery of the world's second-largest economy.

China has plenty of room to maneuver to attain its annual target for robust economic growth of about 5% after a strong start for the year, top economic officials said, though they acknowledged it’s a challenge.

China's 2024 gross domestic product (GDP) growth target of around 5 percent is an achievable goal via enhanced efforts, Zheng Shanjie, director of the country's top economic planner, told a press conference held Wednesday on the sidelines of the ongoing session of the national legislature.

Premier Li Qiang announced the “around 5%” growth target for the year Tuesday at the opening of the congress, which runs for about a week and mostly just endorses policies set by top leaders of the ruling Communist Party.

China’s economy, the world’s second largest, grew at a 5.2% pace in 2023, but that was from a relatively low pace since it expanded only 3% the year before, one of the lowest rates since the 1970s. Growth of around 5% would be cause for rejoicing in the U.S. and other major economies, but it’s moderate for a developing economy with a huge population like China’s.

The senior officials attending the conference highlighted policy coordination to maximize support for the economy.

China’s exports rose about 10% in the first two months of the year from a year earlier, while medium- and long-term loans from banks jumped more than 30%, said China’s top planning official, Zheng Shanjie.

Zheng said the priority will be on “supporting scientific and technological innovation, integrated development of urban and rural regions, food security and energy security, among other areas.”

“The potential construction demand in these areas is huge and the investment cycle is long. It’s hard to fully meet needs using existing funding channels and there’s an urgent need to increase support,” he said at a news conference on the sidelines of the National People’s Congress, China’s ceremonial legislature.

Central bank governor Pan Gongsheng said that the central bank will pay more attention to striking a balance between the short term and the long term, between seeking steady growth and preventing risks, and between internal equilibrium and external equilibrium in its monetary policy regulation.

Gongsheng said Beijing has more policy tools it can turn to, such as reducing the reserve ratio requirement, or the amount of funds banks must keep in reserves.

He emphasized Beijing’s determination to put 1 trillion yuan (about $140 billion) in special, ultra long-term bonds to productive use to upgrade industries and advance technologies in key areas such as clean energy.

Minister of Finance Lan Fo'an noted the country will appropriately enhance the intensity of the proactive fiscal policy, and boost the policy's quality and effectiveness.

To guard against the risks of local government debt, which are generally controllable, Lan said the pace will be picked up in developing a local government debt management mechanism in line with high-quality development.

Talking about policies regarding the capital market, Wu Qing, head of China's top securities watchdog, said that while enhancing regulation for listed firms, more efforts will be made to improve related rules and mechanisms to help competent firms thrive and optimize their corporate structure.

Tapping the potential of the huge Chinese market is one priority task outlined by the government. The country has decided to promote a new round of large-scale equipment renewals and trade-in of consumer goods in a major move to expand domestic demand.

The new round of large-scale equipment renewals is estimated to create an enormous market worth more than 5 trillion yuan (about 704 billion U.S. dollars), according to Zheng.

"Talking about consumer goods, at the end of last year, the number of cars for civilian use in China has reached 336 million, and the number of household appliances in major categories such as refrigerators, washing machines and air conditioners has also exceeded 3 billion units. Therefore, the upgrade of consumer goods such as automobiles and home appliances is also expected to create a trillion-yuan market," he said.

The funds raised through these bonds will mainly support areas such as scientific and technological innovation, integrated urban-rural development, coordinated regional development, food and energy security, and high-quality development of the population, according to Zheng.

Commerce Minister Wang Wentao introduced steps to tap the immense potential of service consumption. From 2013 to 2023, the proportion of per capita consumption expenditure directed toward services increased by 5.5 percentage points, rising from 39.7 percent to 45.2 percent.

Despite robust growth in China’s exports in the first two months of the year, Commerce Minister Wang Wentao said global demand may remain muted given the recent trend toward protectionist measures.

Trade in goods and services rose a mere 0.2% in 2023, according to the World Trade Organization, and will increase this year but not to levels seen before the pandemic.

China’s own exports fell last year, adding to drags on the economy from weak consumer demand and a downturn in the property market, a major contributor to demand for construction, appliances and many other industries.

China plans to do more to promote exports of higher-value products and to support smaller and mid-sized companies in tapping world markets, he said.

“We are confident about consolidating the fundamentals of foreign trade and foreign investment,” Wang said.

The country has seen a boom in trade activities such as busy China-Europe freight trains and cross-border e-commerce during the Spring Festival period, a traditional slack season for imports and exports.

"It's expected that the first quarter will see a good start of the year in economic performance," Zheng said.

China has the confidence, capabilities and conditions to meet the economic and social development targets for this year, he added.

To help spur more consumer spending, an increasingly important driver for growth as China becomes wealthier, the government plans to use tax policies and other incentives to encourage families to scrap their older vehicles, replace aging appliances and redecorate their apartments, the officials said.

In other comments, the chairman of China’s Securities Regulatory Commission, Wu Qing, acknowledged intervening in the financial markets at times when authorities deemed it necessary.

China’s stock markets languished from late last year, though they have recovered somewhat in recent weeks following a crackdown on price manipulation and insider trading among other confidence-boosting measures.

Hong Kong’s Hang Seng index is still 20% below where it stood a year ago, while the Shanghai Composite index has lost 8.5% at a time when many other world markets are breaching record highs.

“Normally there should be no intervention in the markets, but at times when they sharply deviate from fundamentals, show irrational and severe volatility, an extreme lack of liquidity, market panics or a severe lack of confidence, we should act decisively to correct market failures,” Wu said.