China's annual 'two sessions', a pivotal event for economic policy, have begun, with key decisions expected to impact commodity demand. Analysts are closely watching for clues on growth, fiscal policy, and support for key sectors like new energy and property.
China 's annual ' two sessions ', a crucial event for economic policymaking, commenced today, March 4, with the first session focusing on the National Committee of the Chinese People's Political Consultative Conference (CPPCC). This will be followed by the National People's Congress (NPC) session tomorrow. Commodity investors are closely monitoring these sessions as the decisions announced will directly impact demand expectations for the year ahead.
RBC Capital Markets, in a research note released today, highlighted the importance of these sessions, stating, 'We expect to hear about the stance of growth, and fiscal policy in 2025, which will directly affect commodity demand.' The most anticipated event is the presentation of the Annual Budget and Government Work Report, which typically occurs on the first day. Analysts predict that China's GDP target will likely remain around 5%, mirroring the 2024 level, while the government might increase the fiscal deficit target from 3% to 4% of GDP. RBC Capital Markets also pointed to media reports suggesting a potential tripling of central government special bond issuance to RMB3 trillion, with an additional increase of up to RMB1 trillion in local government special bonds. A significant portion of these funds is expected to be allocated towards refinancing local government debt, which could eventually be redirected to infrastructure projects, indirectly supporting commodity demand in the future. The overall impact on the fiscal stance is anticipated to be a widening of the combined budget deficit by about 1.5% of GDP. While this represents an increase, it's considered relatively moderate compared to previous fiscal measures in 2015 and 2020, when the deficit expanded by 2.1% and 3.7% respectively. RBC Capital Markets stated, 'While we don't expect the NPC to fix what ails its economy, we expect policy to support the fragile cyclical upturn experienced in late 2024, but possibly reverse later in 2025 as the benefit of policy fades.' China maintains a confident outlook on its economic performance, dismissing concerns about a slowdown. Xinhua, China's state news agency, published a commentary stating that the Chinese economy is well-positioned to sustain its recovery and maintain steady growth this year. The commentary highlighted China's economic outperformance in 2024 compared to other major economies, emphasizing its role as a significant engine of global economic growth. It also underlined the effectiveness of pro-growth policies implemented since last September and the ongoing efforts to address challenges both domestically and internationally. Meanwhile, amidst global trade tensions and the trend of deglobalization, Chinese media has been emphasizing China's commitment to remaining an open and welcoming economy. The focus on new energy and support for property development will be of particular interest to metals miners. RBC Capital Markets anticipates continued government support for the electric vehicle sector and accelerated renewable power installation this year. They also suggest that last year's increased support for the property sector could persist, potentially offsetting three consecutive years of declining property sales. While challenges remain in terms of inventory levels and developers' appetite for new projects, the potential for property sales growth in 2025 offers a glimmer of hope for the commodity sector
China Two Sessions Commodity Demand Fiscal Policy GDP Target New Energy Property Sector
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