FX.co ★ Beijing aims to spur economic growth through robust consumption

China's economy is set to click into gear soon. China’s Vice Minister of Finance Liao Min believes that the economic stimulus measures recently introduced by authorities will prove their worth. These measures aim to boost domestic consumption and notch a targeted GDP growth rate of 5% in 2024.

The official stated that the goal of the stimulus package is to reinforce the macroeconomic strategy intended to expand domestic demand, as well as to coordinate monetary policy to support the restructuring of the national economy.

Liao Min mentioned that details of the financial policy will be presented only after the meeting of the Standing Committee of the National People's Congress, which will take place from November 4 to 8.

In recent weeks, Chinese authorities have implemented bold measures not seen since the COVID-19 pandemic, including cutting interest rates and increasing the money supply for banks. Experts estimate that these measures are aimed not only at bolstering economic growth but also at curbing risks and minimizing the persistent economic challenges across the country.

A key aspect of the new stimulus measures is using ultra-long special government bonds to finance a consumer goods exchange program. According to Liao Min, this is an unprecedented step that demonstrates the importance of consumption in the country's fiscal policy development.

Earlier, the policymaker confirmed that Chinese officials had discussed these plans with their American counterparts. Liao Min underscored China's determination to forge ahead with reforms and highlighted the country's commitment to high-quality development.

However, substantial funding is required to implement these initiatives. Analysts at Citigroup and Goldman Sachs estimate that 3 trillion yuan ($421 billion) will be needed in 2024 to address income deficit issues and recapitalize banks, along with 5 trillion yuan to repay hidden domestic debt.

Interestingly, the legislative meeting in China, where this stimulus package will be discussed, coincides with the presidential elections in the United States. This could negatively impact relations between Washington and Beijing, especially in light of Donald Trump's threat to impose new tariffs on Chinese imports. This scenario could put a strain on trade relations between the US and China. In turn, China's economic growth may slow down.