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18 Mar 2013
Forex Flash: The National People's Congress concludes - Nomura
FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the National People´s Congress concluded on Sunday with the new cabinet being announced and Premier Li Keqiang answering questions in the press conference.
In response, Zhang comments that the cabinet has a good team in charge of economic issues and in particular, Lou Jiwei, Minister of Finance and Zhou Xiaochuan, Governor of the People´s Bank of China (PBoC), are both capable technocrats with strong track records. They both worked in Zhu Rongji's cabinet during the 1990s (Lou as deputy head of Ministry of Finance, Zhou as PBoC governor) and helped to push for aggressive reforms.
Further, Zhang adds that Premier Li promised to cut the number of public sector employees and public expenditures on overseas travel and automobile purchases during his tenure. He writes, “He acknowledged the fiscal conditions are not as favorable as before, as revenue growth slows. Also, the recent campaign proposed by President Xi against extravagant government consumption suggests the recent weak trend in retail sales may not recover soon.”
Finally, he notes that the aggressive anti-corruption campaign will likely start soon. He writes, “President Xi and Premier Li emphasized the importance of the campaign on different occasions. We believe it will help the sustainability of China's growth in the long term, but creates some short-term downside risks to economy, mostly through consumption.”
Overall, Zhang is remaining cautious on the growth outlook in 2013, and he sees three issues that may increase downside risks in the short term. Firstly, the detailed guidelines on property market policies will likely be rolled out by end March. Secondly, the anti-corruption campaign and finally, policy tightening on shadow banking and M2 growth. He suggests that investors watch developments on these issues.
In response, Zhang comments that the cabinet has a good team in charge of economic issues and in particular, Lou Jiwei, Minister of Finance and Zhou Xiaochuan, Governor of the People´s Bank of China (PBoC), are both capable technocrats with strong track records. They both worked in Zhu Rongji's cabinet during the 1990s (Lou as deputy head of Ministry of Finance, Zhou as PBoC governor) and helped to push for aggressive reforms.
Further, Zhang adds that Premier Li promised to cut the number of public sector employees and public expenditures on overseas travel and automobile purchases during his tenure. He writes, “He acknowledged the fiscal conditions are not as favorable as before, as revenue growth slows. Also, the recent campaign proposed by President Xi against extravagant government consumption suggests the recent weak trend in retail sales may not recover soon.”
Finally, he notes that the aggressive anti-corruption campaign will likely start soon. He writes, “President Xi and Premier Li emphasized the importance of the campaign on different occasions. We believe it will help the sustainability of China's growth in the long term, but creates some short-term downside risks to economy, mostly through consumption.”
Overall, Zhang is remaining cautious on the growth outlook in 2013, and he sees three issues that may increase downside risks in the short term. Firstly, the detailed guidelines on property market policies will likely be rolled out by end March. Secondly, the anti-corruption campaign and finally, policy tightening on shadow banking and M2 growth. He suggests that investors watch developments on these issues.