China’s Two Sessions: Economic Growth Target and Policy Shifts in Focus

China’s highly anticipated Two Sessions begins next week in Beijing, with policymakers expected to maintain the 2024 GDP growth target at “around 5%,” according to ING analysts. Premier Li Qiang’s government work report on March 5 will outline key economic strategies for the year, with a strong focus on boosting domestic demand amid global uncertainties.

China has historically prioritized meeting growth targets, missing them significantly only twice since 1990. ING expects fiscal and monetary policies to align with this goal, suggesting stronger stimulus measures if needed. Analysts predict a shift from a “prudent” to a “moderately loose” monetary policy, marking the first major stance change since 2011. This could lead to a 30-basis-point rate cut and a 100bp reduction in the reserve requirement ratio (RRR), potentially starting in March.

With external trade slowing due to rising protectionism, domestic demand is set to take center stage. Trade-in policies and equipment renewal subsidies may be introduced to drive consumption and investment. Despite speculation, ING does not anticipate a yuan devaluation to counter U.S. tariffs. Instead, policymakers are expected to maintain stability, keeping the USDCNY exchange rate between 7.00 and 7.40 throughout the year.

As China navigates economic challenges, its policy direction will be closely watched by global markets. The upcoming Two Sessions will provide crucial insights into how the world’s second-largest economy plans to sustain growth and tackle shifting economic dynamics.